[2008-05-20]  Saudi Arabia expected to see mega IPO activity
A surge in domestic liquidity and market reforms have sharply boosted IPO activity in Saudi Arabia this year and economists in the Gulf Kingdom expect it to reach one of its highest levels through 2008. Total initial public offerings has swelled to a record SR24 billion (Dh23.7 billion) so far this year, surpassing the SR19.2 billion (Dh19 billion) IPO for the whole 2007, the Saudi National Commercial Bank (NCB) said yesterday.

In a report sent to Emirates Business, the largest bank in Saudi Arabia attributed the surge to high domestic liquidity, a surge in the Kingdom's oil income, strong domestic demand and the ongoing reforms to the market. NCB said IPO activity in the first four months of this year indicated the issue would climb to one of its highest annual levels in the Kingdom's history.

"IPO activity in Saudi Arabia is expected to be at one of its strongest levels in 2008 given the soaring domestic liquidity, mounting oil revenues, ongoing market liberalization reforms, and thriving domestic demand," it said. "Since the beginning of the year, around SR24 billion has been raised by IPOs, compared with SR19.2 billion for the whole of 2007."

According to the report, new entrants that have successfully raised capital via IPOs through the second quarter of 2008 were the locally based Alinma Bank and Mohammad Al Mojil Group (MMG), which is involved in construction.

The Alinma Bank IPO closed 1.74 times the initial capital asked for, and raised a staggering SR10.5 billion (Dh10.3 billion), the largest since Saudi Telecoms in 2003. The MMG IPO offer was also oversubscribed by 3.14 times, with raised-up capital amounting to SR1.8 billion (Dh1.78 billion).

"The Saudi equity market is also expected to deepen further with announcements of new IPOs from Astra Industrial Group (30 per cent of equity), Chemanol (50 per cent of equity), and Maaden (50 per cent of equity equivalent to SR9.25 billion (Dh9.15 billion)… another reason is the approval of new investment funds, namely, Al-Safwa Shariah Index Fund and Rana Liquidity Fund," NCB chief economist Saeed Al Shaikh said.

Like other Gulf oil producers, Saudi Arabia has recorded a sharp growth in economic and financial activities by the public and private sector over the past months because of a surge in their petrodollar income and other factors.

The bulk of the IPO activities in the Kingdom and its Gulf neighbours involved both small and large companies seeking to take advantage of the business upswing in the region. Other giant firms were also involved in such operations with the aim of becoming publicly traded entities.

Saudi Arabia has been locked in reforms to ease reliance on volatile oil sales, attract foreign capital and boost domestic savings. The reforms covered investment laws, economic sectors and the stock market.

At the year-end, Saudi will have its first e-bond trading system and officials said the project is designed to cope with an expected surge in such activity. More investment funds are planned to attract expatriate investors.


Source: Copyright © 2008. Arab Media Group.