IPO Boom in Middle East Pulls Ahead of Struggling Europe Market

(Bloomberg) -- Initial public offerings in the Middle East are outpacing Europe for only the second time since the global financial crisis, as regional investors put oil-fueled cash piles to work.

IPOs from Riyadh to Abu Dhabi have raised $4.8 billion this year, compared to Europe’s tally of $3.9 billion, data compiled by Bloomberg show. It’s a rare occurrence for the Middle East to post a bigger quarter: The only other time this has happened since 2009 was in late 2019, when Saudi Aramco pulled off the world’s largest-ever listing.

Saudi Arabia’s Riyad Bank has taken the top spot this quarter in Bloomberg’s IPO league table for Europe, the Middle East and Africa, which is usually dominated by U.S. and European institutions. Half of the biggest listings to price in EMEA this year have come from the Gulf, the data show.

This year’s market turmoil driven by worries over inflation, hawkish central bank policies and Russia’s invasion of Ukraine has scuppered IPOs across the globe. But soaring energy prices has benefited the oil-rich Persian Gulf, ensuring investor demand for share sales in the Middle East remains high.

“The recent movements in oil prices have translated into regional investors having additional capital to deploy, which is also contributing to propping up the market,” said Andree Chakhtoura, head of investment banking for the Middle East and North Africa at Bank of America Corp.

The war in Ukraine has exacerbated existing supply crunches for fossil fuels, sending prices soaring. Equity benchmarks in Saudi and the United Arab Emirates have all gained 5% or more this year, while Europe’s Stoxx 600 Index has slumped more than 6%. 

Boosted by strong stock markets, the Gulf deal boom is showing no signs of slowing. Abu Dhabi National Oil Co. and Borealis AG are lining up an IPO of their plastics venture Borouge, while Dubai Electricity & Water Authority is expected to start trading next month after what would be the emirate’s biggest listing on record.

“The region has so far been driven by privatizations and monetization initiatives, especially in Dubai and Abu Dhabi, but we are now seeing privately-held growth companies express an interest in coming to market,” she said.

Retail pharmacy chain Nahdi Medical Co. jumped 15% in its Riyadh debut on Tuesday after a $1.4 billion IPO, the biggest in Europe, the Middle East and Africa this year. Eye-watering levels of demand have almost become commonplace in Saudi Arabia, with Nahdi Medical attracting $80 billion in orders from institutional investors.

Still, spreading geopolitical unrest could quickly sour investor sentiment. Russia said this month it plans to send local fighters from the Middle East to join its forces in Ukraine, while attacks from Iranian-backed Yemeni rebels on Saudi Arabia’s oil infrastructure could disrupt crude exports at a crucial time for energy.

©2022 Bloomberg L.P.