RIYADH – In the first quarter of 2019, Saudi Arabia led the MENA IPO market raising a cumulative value of $58.3m in capital, contributed by the listing of Saudi software & services company, Al Moammar Information Systems Company (Saudi SE) on Tidal, declines according to the latest EY MENA IPO Eye report. In Q1, Saudi Arabia’s Tadawul witnessed the start of the initial phase of inclusion on two major international indices in March 2019: the FTSE Russell and S&P Dow Jones’ Emerging Markets indices.

Moreover, e, the structural changes to Nomu announced by the Tadawul to support the number of SME listed companies will be executed in two phases in 2019. The first phase includes provisions to allow direct listings on Nomu without an IPO. The second phase will focus on the listing of close-ended funds (CEFs) and real estate investment trusts (REITs) on Nomu.

Phil Gandier, MENA Transactions Leader, EY, said: “All of these developments underline the fact that KSA has been implementing a number of regulatory enhancements in its equity markets that are effectively improving market access for investors. The Kingdom’s inclusion in these indices is likely to further accelerate buying activity from foreigners in the country. These developments are aligned with the objectives of the financial sector development program envisaged by Saudi Vision 2030 and will support IPO activity in the wider region.”

While market fluctuations in the MENA region and volatility in global equity markets have caused investors to be cautious, the pipeline for IPO activity in region is strong along with positive opportunities ahead. Egypt has its sights set on raising around $448m from the government IPO program in FY2019–20. The Egyptian exchange (EGX) plans to set up a settlement firm for the futures and derivatives market. The proposed market will make a range of financial instruments available to investors.

The oversubscribed follow-on offering by Eastern Tobacco in February 2019 marked the start of the privatization agenda in Egypt. The private placement part of Eastern Tobacco’s secondary offering of a 4.5% stake was oversubscribed by 1.8 times. Egypt is planning to enable the listing of four to five companies in the second phase of its share sale program that is due to take place by Q4 2019.

More listings on the horizon in Oman in the next two years. Approximately six power generation and water desalination companies are scheduled to be part of the Muscat Securities Market (MSM) IPO market in the next two years.

Gregory Hughes, MENA IPO Leader, EY, said: “There is interest from several companies across the MENA region to execute IPOs, especially for those looking to access international investors and stock markets, however market volatility has dampened IPO activity in the first quarter of this year, and its typically a quieter quarter for IPO activity. Economic reforms and market development initiatives are high on the agenda of regional governments, particularly in Saudi, Egypt and the UAE, which will pave the way for a buoyant MENA IPO market in the upcoming quarters.” – SG