Limited IPO activity in MENA continues in Q1 2016; Egypt and KSA lead activity: EY

 The Middle East and North Africa (MENA) region witnessed only two IPOs raising US$615.0m in Q1 2016, representing another quarter with limited IPO activity, according to EY. Capital raised through MENA firms in Q1 2016 increased by 141%, while the number of IPOs were consistent (2 IPOs), compared with Q1 2015. 

Phil Gandier, MENA Transactions Leader, EY, says:

“Q1 2016 witnessed limited IPO activity, in line with H2 2015, as volatility in the MENA capital markets continued, primarily driven by fluctuating oil prices and certain global factors. Egypt and KSA continue to lead the limited IPO activity in the MENA region driven by investor demand and strong fundamentals. There is a strong pipeline of companies in MENA that are IPO ready and waiting for the right time to go to market.”  

Egypt and the KSA continue to lead IPO activity in MENA

The IPO of Middle East Healthcare Company on the Saudi Stock Exchange (Saudi SE) (Tadawul) was the largest IPO in the quarter, raising US$471.1m and was over three times the size of the IPO of Arabian Food Industries Company (Domty) on the Egyptian Stock Exchange (Egypt SE),  the only other IPO in MENA in Q1 2016.

Mayur Pau, MENA Strategic Growth Markets and IPO Leader, EY, says:

“Egypt and Saudi Arabia continue to be the most active MENA exchanges in Q1 2016, continuing on from 2015, where IPOs in Saudi Arabia and Egypt represented eight out 14 IPOs executed in the year. Both markets continue to attract investors against a backdrop of increasing foreign investment, emphasis on diversification and business confidence.”

Oil price fluctuation continues to drive MENA stock market performance

Oil prices declined in January 2016 to the lowest level in several years (below US$30 per barrel) resulting in fluctuations across the MENA capital markets. According to analysts, brent crude oil prices declined primarily due to an increase in global oil supply and reduced demand, driven by uncertainty in the performance of the global economy. 

However, the price of brent crude rose slightly towards the end of the quarter, trading at around US$40 per barrel, resulting in a uptick in MENA stock market performance.

“The recent OPEC meeting did not result in a consensus in terms of an output cap from oil-producing countries to stabilize oil prices. Given the continuing uncertainty in global economic performance and fluctuating oil prices the outlook for MENA IPO activity is likely to remain subdued in 2016 unless confidence improves. The key drivers to MENA IPO activity continues to be fluctuating oil prices, regional geopolitical factors and the performance of the global economy,” concludes Mayur.