new regulations in the GCC set to strengthen capital markets: EY

The MENA region witnessed six IPOs in Q2 2016, collectively raising US$397.2m, a 40% decrease in volume and 81% decrease in value compared to Q1 2016.

Phil Gandier, MENA Transaction Advisory Services Leader, EY, says: 

“Given the recent trends, Saudi Arabia and Egypt are the key MENA markets that are likely to see any IPO activity in MENA. Uncertainty in the global capital markets, driven by events such as the vote by the UK to exit the European Union and fluctuating oil prices, may result in future uncertainty in the MENA capital markets and the potential deferral of IPOs in the MENA region.”

New regulations to strengthen MENA capital markets

The UAE has circulated new draft IPO regulations for feedback from stakeholders, setting requirements increasingly in line with international exchanges.

Looking to Saudi Arabia, the Capital Market Authority has announced a number of major changes such as relaxing the requirements for foreign institutional investors, introducing new trading options, and the relaxation of reporting deadlines and the implementation of a new settlement process (T+0 to T+2) as Saudi Arabia works toward inclusion on the MSCI Emerging market index.

Saudi Arabia and Qatar have also announced plans to open a new exchange for small and medium-sized companies towards the end 2016 or beginning of 2017.

“Regulators in the MENA markets continue to implement new regulation to strengthen the capital markets and attract investment. Once the economic environment stabilizes and general market sentiment improves, the backlog of IPO candidates will begin to emerge. Looking historically at economic cycles, the right window of opportunity is often quite short, so it is crucial for companies who are looking to IPO to prepare well in advance. That way they can hit the market when the time is right,” comments Mayur Pau, MENA Growth Markets and Financial Services IPO Leader, EY.