Middle East markets are set for steady growth in 2007, with thriving IPO activity reflecting the effects of rapid globalization, a report says.
Ernst & Young’s Globalization, the fourth annual Global IPO Report says despite erratic performances in 2006 with instability has not affected investor appetite for IPOs.
Exchanges in the region were largely down for the year, excluding Oman, Bahrain, Kuwait and Egypt. The Saudi exchange lost more than half its value and Dubai’s exchange fell by two-thirds since its peak the previous year, the report says.
However, Omar Bitar, managing partner, business advisory services Ernst & Young Middle East, said instability was “bound to reverse.”
“Middle East instability has not seriously dampened investor appetite for IPOs. In 2006, Middle East IPO markets raised $10.8 billion through 87 deals. A strong outlook for the next 12-24 months includes large-scale privatizations and infrastructural projects” he said.
According to the report, key IPO trends of the last 18 months are flourishing stock markets, vibrant growth in emerging markets, escalating rivalry between the world’s stock exchanges, a boom in large listings on local exchanges and a proliferation of alternative financing options.
Greg Ericksen, global vice chair for strategic growth markets said “The availability of capital around the world and surge in IPO-ready companies worldwide are rapidly changing the face of the world’s capital markets.”
As capital becomes more global, the report says, the majority of IPOs stay local. 90% of companies worldwide choose their primary place of listing in the market where they operate, and the growth of liquidity and international investor interest has enabled even the largest companies to list at home.
“For most companies, the local markets are where infrastructure, investors and liquidity can most easily be found, and where investor relations, regulatory frameworks and market expectations are the most familiar” Ericksen said.
Capital raised worldwide by companies going public hit $246 billion in 2006, up from $167 billion the previous year. China took the lead at $56 billion, followed by US companies at $34 billion, and Russian at $18 billion.
The US launched the highest number of IPOs with 187 listings, followed by Japan with 185 and China with 175.
Emerging markets remain the most vibrant growth stories, with China fuelling Asian markets and Russia driving European markets.
Other key findings include an increase in the number of world-class financial centres, heated rivalry between exchanges for cross-border listings and the emergence of private equity firms as key players in IPO and M&A markets.