Morgan Stanley, owner of the world’s biggest brokerage, is predicting the return of initial public offerings worth more than $1 billion in the Persian Gulf after asset values and stock markets rallied.
“We expect to see two to three billion dollar-plus IPOs in the second half of this year out of the Gulf region,” Klaus Froehlich, head of investment banking for Morgan Stanley in the Middle East and North Africa, said yesterday in an interview at the bank’s Dubai offices, declining to say if it was involved in any deals. “It’s a renaissance of the local IPO market.”
Dubai’s benchmark index, the world’s best-performing stock measure in 2014, surpassed 4,000 points yesterday for the first time in five years as economic growth and rising oil prices drive demand for assets in the region. Qatar Petroleum raised 3.2 billion riyals ($879 million) last month selling shares in its Mesaieed Petrochemical Holding unit, while Dubai-based Damac Real Estate Development Ltd. generated $348 million in December through the sale of global depositary receipts in London.
Government-related entities and large family companies are returning to equity markets after a five-year hiatus, according to Froehlich. Some older deals are being revived because of better trading conditions and risk appetite, he said.
“Valuations and volatility are at a good place right now so we’re in a sweet spot,” he said. “We’ve actually been in this sweet spot for about a year in this region, but people are finally recognizing this and want to do something about it.”
The DFM General Index more than doubled last year, outperforming all benchmark measures in the 50 largest equity markets globally on a dollar basis, pushing valuations to near a five-year high, according to data compiled by Bloomberg. Shares in Dubai rose 1 percent yesterday, taking this year’s gains to 18 percent.
Arabtec Holding, the largest listed construction contractor in the United Arab Emirates, said yesterday it will set up Arabtec Capital in the Dubai International Financial Centre to provide financial and public offering services.
The six-member Gulf Cooperation Council generated IPOs valued at $1.1 billion last year, compared with $15.4 billion in 2007 before the financial crisis, data compiled by Bloomberg show.
Port operator DP World Ltd., a unit of Dubai World, raised $4.96 billion in November 2007 in the Middle East’s largest IPO. That offering was 15 times oversubscribed and the last such deal valued at more than $1 billion in the United Arab Emirates. Since then, the region’s largest IPOs have been in Saudi Arabia, where foreign investors can’t invest directly.
Saudi Arabian Mining Co., the metals and minerals producer known as Ma’aden, raised $2.47 billion after selling a 50 percent stake to the Saudi public in July 2008. Zain Saudi Arabia, a unit of Kuwait-based Mobile Telecommunications Co. completed a $1.9 billion share sale in February 2008, according to data compiled by Bloomberg.
Qatar Petroleum’s Mesaieed offering was the country’s biggest share sale since Vodafone Qatar QSC raised $928 million in 2009, according to data compiled by Bloomberg. Damac’s sale was the first IPO by a Dubai-based developer since the sheikhdom’s property crash in 2008 and followed the London listings of Abu Dhabi-based health-care providers Al Noor Hospitals Group Plc in June and NMC Health Plc in 2012.
“Often companies that are looking at an IPO of a larger size initially look at going abroad to get the international recognition and potentially more flexibility on pricing,” Froehlich said. “But people are also very conscious of where they come from which means many are also looking at dual listings.”