GCC IPO Market to Remain Strong in 2024, Says Fitch Rating

The GCC governments’ plans for privatisation is all set to help the Initial Public Offerings (IPOs) momentum remain strong throughout 2024, global rating agency Fitch Ratings said in a latest report.

The report said that the number of IPOs in 2023 were 43, compared with 48 listings in 2022, and the IPO proceeds were estimated to be around $11 billion, nearly half of the $23 billion that were raised in 2022, the report said.

The report said that credit profiles of financial market infrastructure (FMI) companies in GCC markets continue to be supported by capital market reforms, resilient IPOs and fixed-income listings as well as their key role in developing and diversifying local economies.

“However, revenue mixes and product offerings of GCC FMIs remain less diverse and risk management frameworks less advanced than at those in more developed economies,” the report noted.

According to the report, GCC capital markets continued to grow in 2023, supported by sustained economic growth underpinned by stable oil prices and growth in non-oil sectors, despite a global fall in IPO markets and bond issuances.

These governments aimed at attracting investors through reforms, such as the establishment of IPO funds and the relaxation of foreign ownership restrictions, which is shown by the GCC’s increased share in emerging markets indices.

Tadawul, the Saudi exchange, dominated the FMI sector in the region in terms of market capitalisation, even when excluding the impact of the large IPO of Saudi Aramco in 2019, Fitch Ratings said.

However, the share of foreign listings remains low and IPOs remain dominated by the part-listing of state-owned enterprises. Free floats for new listings are often minimal, constraining liquidity. The energy sector, in particular oil and gas, dominates market capitalisation across GCC markets, accounting for over half the total at end-2023, the agency noted.

The ownership by or proximity to domestic governments or government-related entities supports Fitch’s view of the FMIs’ credit profiles. However, even without majority government ownership (like in Kuwait), Fitch would expect government support to be forthcoming if needed given the systemic importance of FMIs and the absence of any senior creditor bail-in legislation.

Saudi Leads

According to Kamco Invest, Saudi Arabia led the GCC region with 35 of 46 IPOs and the figure included listings on both the mail market Tadawul and the parallel market Nomu, for smaller and earlier-stage companies. The UAE led the region last year in terms of total IPO proceeds.

The Saudi IPO market is still going strong in Q1 of 2024 with regional broadcaster MBC Group listing on Tadawul in January and raised close to $222 million. Avalon Pharma has gone public on the main market and Moderns Mills recently priced its IPO at the top of the range. Al Modawat Specialised Medical Hospital and Pan Gulf Marketing have both made their debuts on Nomu.

More IPOs

The other IPOs that are expected on Saudi exchange include eXtra, which is considering to offere 30% shares of consumer finance arm, Singapore’s Olam Group, which is mulling the listing of its Olam Agri subsidiary on Tadawul, Hypermarket operator Lulu and Aster DM Healthcare reportedly planning a dual listing on Tadawul and Abu Dhabi Securities Exchange (ADX).