DOHA: Qatar Exchange (QE), the Tadawul (Saudi Stock Exchange) and the Dubai Financial Market (DFM) are expected to be the most active GCC exchanges over the next 12 months, and there is a strong pipeline of issuers looking to launch IPOs regionally as well as on international stock exchanges, according to Deloitte Middle East’s first Equity Capital Markets Confidence Survey.
The survey, which was conducted through meetings with 30 equity capital market practitioners within regional and international banks operating in the GCC, covering the Mena region, covers topics such as the macro-economic environment, valuations, the IPO process and regulations amongst other themes.
“QE is expected to be one of the most active exchanges in the GCC over the next 12 months with a strong pipeline of issuers looking to list. Of the respondents interviewed in Qatar, all expected an increased number of new listing in the coming year. It will certainly be interesting to see how QE will respond to attract issuers, given that all Qatar respondents cited increasing regulation as a trend within the coming two years” said Robin Butteriss, Head of Financial Advisory Services at Deloitte & Touche, Qatar.
According to the survey the sectors expected to drive growth in the GCC include infrastructure, retail, oil and gas, and manufacturing and are likely to attract potential issuers in the foreseeable future. Over 70 percent of the respondents expect the volume of IPOs in the GCC region to increase in the next 12 months. Increases in trading volumes are driven in large part by foreign investors seeking a safe haven from socio-political turmoil in the wider Middle East region, which is positively affecting real estate and stock values in GCC countries, especially the UAE.
The announcement by the Morgan Stanley Capital International (MSCI) to upgrade the Qatar and UAE exchanges to emerging market status, effective from May 2014, has gone some way in explaining the uplift in valuations. Challenges typically experienced on IPO processes include mismatch of valuation expectation, lack of readiness on the part of issuer to deal with the IPO process and conforming to listing requirements.
On the IPOs timeframes, KSA IPOs on average took longer to go through the listing process, with almost 90 percent of respondents experiencing a typical process in excess of 12 months, and 23 percent of respondents experiencing over 24 months.
Prospective issuers are increasingly being encouraged to give consideration to engaging specialists earlier in the IPO process to help identify any red flags and therefore minimise delays and overall costs.