Despite the headwinds brought on by the pandemic, GCC equity capital markets were able to sustain a reasonable level of activity with strong government support and significant stimulus measures globally. With the ‘new normal’, GCC IPOs have resumed albeit with limited activity. In contrast, the debt market has been highly active and we expect the debt market activity to continue in the near future.
During the year, initiatives were taken in the Kingdom of Saudi Arabia and United Arab Emirates to facilitate equity capital market activities on their respective stock exchanges:
- Tadawul launched its first Derivative Market in Q3 to gain access to a broader spectrum of local and international investors.
- Saudi Arabia’s Capital Market Authority approved the direct listing of Saudi White Cement Company on the Nomu Parallel Market, enabling Tadawul to become the first GCC exchange to allow direct listings, i.e. listings of shares without an offering, with the advantage of less time, cost and effort for entrants.
- Nasdaq Dubai launched a Growth Market aimed at small and medium-sized companies. It has more relaxed requirements compared to the main board, providing more flexible options to raise capital through IPO.
- Nasdaq Dubai also signed a cooperation agreement with Hong Kong based Zhongtai Financial International and Beijing Tian Tai Law Firm to encourage and support Chinese companies to list on the exchange.
Regional IPOs
GCC markets witnessed 7 IPOs totalling USD 1.6 billion in proceeds. Tadawul continued to be the most active GCC stock market in 2020 contributing 86% of the total proceeds raised and 57% of the number of listings. The decline in economic growth rates and drop in oil prices led to an extremely active debt market throughout the year with a number of GCC governments issuing multi billion sovereign debt. Nasdaq Dubai experienced record sukuk and bond listings worth USD 18.4 billion during the year.
Global IPOs
H2 2020 witnessed a significant increase in IPO activity across all regions compared with H1 2020, with 1,009 IPOs raising USD251.3bn in the half year (H1 2020: 406 IPOs; USD80bn).The increase in the IPOs is partially attributable to SPAC IPOs that raised $38.2 billion in Q4 2020 alone.
The healthcare sector was the most active sector in 2020 with 911 transactions raising USD120.5bn. The vaccine rollout around the world should underpin a global economic recovery in 2021. This will build from a position where equity markets have been benefiting from an extended period of low interest rates, low inflation and government stimulus, particularly in Europe and the US. However, the timing of the expected positive impact on economies, corporate earnings and capital markets will depend on the progress of vaccination programs.
Regional Sovereign Treasures
The drop in oil prices prompted sovereign treasurers to inject funds into the local economies through debt financing resulting in 6 sovereign issuances in the second half of the year from the Kingdom of Saudi Arabia, the Emirate of Abu Dhabi, the Emirate of Dubai, the Emirate of Sharjah, the Kingdom of Bahrain and the Sultanate of Oman.
This period also witnessed some sizable corporate issuances including the USD 1.5 billion sukuk by DP World in July 2020 which represents the largest outstanding emerging markets US dollar corporate subordinated hybrid, the largest hybrid Sukuk offering, and is DP World’s inaugural perpetual issuance.
Mohamed ElBorno, Partner, Head of Assurance at PwC Middle East notes: “It is encouraging to see some GCC IPO activities after a pause in Q2. In the past, Q3s had typically been the quiet quarter. Q3 2020, however, had benefited from the buildup of a backlog over Q2 2020 driven by COVID-19’s impact worldwide. This resulted in 3 IPOs across two GCC countries, raising USD 325 million compared to USD 93 million in Q3 2019.”
He added: “Q4 2020 experienced only 1 IPO on Tadawul with proceeds of USD 585 million compared to 4 IPOs raising USD 26 billion across multiple GCC stock markets in Q4 2019. Excluding the impact of the IPO of Saudi Aramco, IPO proceeds in Q4 2020 remain in line with the prior year.”
