GCC Capital Markets Watch - Q2 2022

Q2 2022 Overview

As the general global market condition continues to deteriorate amidst persistently high inflation, the GCC region is relatively well shielded from these conditions. Whilst the volume of IPOs in Q2 2022 is 47% less than Q1 2022 at 8 across the GCC (Q1 2022: 15; Q2 2021: 1), they generated USD8.8 billion in proceeds, which is 78% more than the previous quarter (Q1 2022: USD4.9 billion; Q2 2021 USD66 million). GCC IPO performance in Q2 2022 outperformed that of Q2 2021 by both volume and proceeds.

This brings the total number of GCC IPOs in H1 2022 to 23 raising USD13.7 billion in aggregate, exceeding any other first half in the last decade. The increase in energy prices, together with regional government initiatives and increase in foreign direct investments, has protected the region from the global economic hardship and contributed to the growth in capital market activity in the region. For the first time in nearly a decade, the UAE leads the GCC region in terms of quarterly IPO proceeds generating 93% of the regional proceeds with 3 listings. UAE’s IPO activity made an impact in the global capital markets with the country ranking 2nd globally by IPO proceeds, moving up 6 places from Q1 2021. The remaining 5 IPOs in the quarter were listed on Saudi Arabia’s Tadawul.

The debt market also saw an increase in activity in Q2 2022 compared to Q1 2021. Debt markets in Q2 2022 saw activity from UAE, KSA, Qatar and Bahrain. With UAE and KSA appearing the most active.

GCC Q2 2022 highlights

Top 3 GCC IPOs in Q2 2022 by proceeds

Dubai Electricity & Water Authority PJSC
Exchange
DFM
Pricing date
12-Apr-22
Money raised
USD 6.1bn
Borouge
Exchange
ADX
Pricing date
3-Jun-22
Money raised
USD 2.0bn
Retal Urban Development Co
Exchange
Tadawul
Pricing date
27-Jun-22
Money raised
USD 384m

Regional Activity

Q2 2022 is the best-performing quarter by proceeds since the listing of Saudi Aramco in Q4 2019, surpassing new highs set in Q1 2022.

The Kingdom of Saudi Arabia generated USD585 million from 5 IPOs, generating 7% of Q2 2022 GCC proceeds. Retal Urban Development Co was the biggest IPO on Tadawul for the quarter, raising USD384 million, followed by Saudi Home Loans which generated USD160 million.

Although IPOs on Tadawul were not as active in Q2 2022 as the previous quarter, Saudi Arabia still outperformed many other countries on a global scale, ranking 5th globally and generated 2% of the global proceeds. More 2022 IPOs are expected for the Kingdom. The Q3 2022 pipeline appears strong with 5 companies already in advanced stages of the IPO process.
Q2 2022 is a phenomenal quarter for the United Arab Emirates. The listing of the Dubai Electricity and Water Authority (“DEWA”) on DFM represents the first of the 10 state owned entities in Dubai to be listed following the Dubai government’s mandate. At USD6.1 billion proceeds and 37 times oversubscribed, this is the UAE’s largest listing on record and was the largest IPO in Q2 2022 globally, signifying a reactivation of the UAE IPO market.
Abu Dhabi has also contributed significantly to the strong Q2 IPO activity of the country. Abu Dhabi’s Borouge listed on ADX generating USD2 billion in proceeds. This is the largest listing on ADX since 2017. ADX also hosted the UAE’s first SPAC listing of ADC Acquisition Corporation PJSC generating USD100 million. ADC Acquisition Corporation also listed warrants in conjunction to its IPO. These transactions led UAE to be the country with the most IPO proceeds globally in Q2 2022, surpassing Saudi Arabia and even USA. The outlook for the UAE remains positive for Q3 2022 and beyond. TECOM already completed its IPO in July 2022 and that of RTA announced and underway. ADX chairman indicated there could be 13 new listings on ADX by year end. This initiative is intended to help boost the market value of the exchange to AED3 trillion.

Whilst Oman did not host any IPO in Q2 2022, it is expected to show increased IPO activity in the near future. Oman Investment Authority (OIA), which is seeking to exit numerous assets across various sectors, including two units of State energy company OQ, through potential listing on the Muscat stock exchange. This exit represents OIA contribution towards realizing Oman’s Vision 2040 to achieve economic diversification, decrease oil dependence and empower the private sector.

There were no IPOs in Kuwait in Q2 2022. However, family-owned automotive business Ali Alghanim has completed a private listing on Boursa Kuwait. Qatar also had no IPO activity in the quarter.

GCC IPO market had been very active in Q2 2022, even when compared to a strong Q1 2022. The momentum is expected to continue into Q3 2022 with a number of high profile companies in the pipeline.

The debt market also experienced a high level of activity in Q2 2022. 

UAE listed USD400 million worth of treasury bonds on its Nasdaq exchange. The Government of Bahrain issued a bond valued at USD395 million. The Government of Qatar listed treasury bills with a value of USD302 million. A number of bonds that have been listed on the London Stock Exchange, such as those issued by Sweihan Power and Abu Dhabi National Energy Company, also started their secondary listings on ADX.

The biggest corporate bond issuer in Q2 2022 was Industrial and Commercial Bank of China Limited, with issuances in the quarter totaling USD2.7 billion.

The UAE’s Nasdaq Dubai continued to be the leading sukuk exchange. During the quarter, the Indonesian government listed multiple sukuks totaling USD3 billion and IsDB Trust Services No.2 SARL - 2027 listed a USD 1.6 billion sukuk.  Exchange hosted the largest corporate and sovereign sukuk listings in Q2 2022 in the GCC region.


GCC equity markets performance by cumulative total return since 1 January 2020

GCC equity markets performance by cumulative total return since 1 January 2020

Source: Eikon (Thomson Reuter), PwC Analysis


Share price performance of 2019, 2020, 2021 and 2022 GCC IPOs* by sector, relative to the respective all share index, from the IPO date to 30 June 2022

Source: Eikon (Thomson Reuter), PwC Analysis

The percentage figures shown in the chart above are the average share price movements of the newly listed companies under each sector relative to the index performance of the respective exchange.

* The IPOs of Al Moammar Information System Company, Sprinkle Holding BSC and Oman reinsurance have been excluded due to insufficient data.
** The increase is mainly contributed by an increase of 2555% in the share price of Boursa Kuwait Securities Company (K.P.S.C.). If Boursa Kuwait Securities Company (K.P.S.C.) is excluded, the increase would be 16%.

Global IPO performance

Continuing on the trend in Q1 2022, the global capital markets are still experiencing a significant downturn amidst high inflation, slowing global growth and ongoing tension between Russia and the western economies. As a result, global IPO market sentiment remained frail in Q2 with volumes significantly lower than both Q1 2022 and Q2 2021. There were 232 IPOs in Q2 2022 generating proceeds of USD36.6 billion (Q1 2022: 286 IPOs raised USD56.1 billion; Q2 2021: 631 IPOs raised USD133.1 billion), circa 60% less IPOs and 73% less proceeds than Q1 2022. Q2 2022 saw a number of transactions being canceled or postponed as investors continued to test valuations. The Q2 2022 IPO activity represents significant new lows for the global market, even lower than that experienced in COVID-19 Q2 2020.

A trend reversal is not anticipated in the near future. The IPO market will likely remain quiet until volatility moderates. There would be some attempts to tap into the H2 2022 IPO market, although the broader pipeline will likely be pushed out into 2023.

Top 3 IPOs in Q2 2022 by proceeds

Dubai Electricity & Water Authority
Exchange
Dubai Financial Market
Pricing date
6-Apr-22
Money raised
USD 6.1bn
Life Insurance Corp of India
Exchange
Bombay Stock Exchange; National Stock Exchange of India
Pricing date
12-May-22
Money raised
USD 2.7bn
Borouge plc
Exchange
Abu Dhabi Securities Exchange
Pricing date
31-May-22
Money raised
USD 2.0bn

Similar to Q1 2022, the Asia-Pacific region took the lead in Q2 2022 by both IPO volume and proceeds, despite experiencing a quarter on quarter decrease. The region generated USD20 billion from 150 IPOs, with China and India being the main drivers contributing about 90% of total proceeds. The listing of Life Insurance Corp of India on the Bombay Stock Exchange generated USD2.7 billion of proceeds, the largest ever IPO in India and second largest globally for Q2 2022. Suzhou Novosense Microelectronics Co Ltd listed on Shanghai’s Sci-Tech Innovation Board (STAR market) generating USD0.9 billion. Hong Kong was also active in the Asia-Pacific, though to a lesser degree, with 9 IPOs raising USD0.6bn in total.

The Americas carried on the downward movement from Q1 2022 and has moved down to third place in terms of global proceeds. The 42 IPOs in the region generated USD4.7 billion, with SPAC IPOs accounting for approximately half of the IPO volume.

The EMEA markets saw a 59% decrease from USD28.8 billion in Q1 2022 to USD12 billion in Q2 2022, which was largely propped up by the significant level of activity in the middle east region. The UAE’s IPO activity accounted for 72% of EMEA total proceeds. The main European exchanges and the UK saw limited IPO activity. Italy, being the notable exception, had a USD0.5 billion listing with Industrie De Nora SpA (chemicals).

Global IPO activity
Top countries by % of total IPO proceeds raised in YTD 2022

Top tips

Liquidity is key - debt vs equity funding

As interest rates are on the rise and as such the cost of debt is also increasing, companies need to examine their approach to financing. Companies potentially in need of debt capital might be better off completing such transactions sooner. They should also consider how their credit ratings might have changed because of the impact of COVID-19 on their businesses which could potentially increase costs related to debt financing. On the other hand, regional government drives and the current GCC economic activity enhanced by the increasing oil price are likely to have a positive impact on investors’ confidence, giving rise to increased equity activity.

Today determines tomorrow

Companies interested in equity funding in the longer term should start preparing now. Because of the regulatory requirements, which vary depending on your chosen market, it typically takes 6-12 months for a private company to get ready for an IPO – a process which involves looking at how your business has performed over the last 3 years, its outlook and its corporate governance.

Equity ready

Ensuring all the regulatory requirements are met is a given in all IPOs. One key aspect to also consider in an IPO is the equity story - a company’s appeal to potential investors. In the post COVID-19 era, equity stories will need to be stronger than ever. Executives need to ensure the company has a solid track record and a future-proof strategy that will resonate with its target investors. Some of the major themes apparent in equity transactions globally in the recent quarters include a strong balance sheet, efficient capital structure and environmental, social and governance (ESG) premium.

GCC IPO activity available from 2015 - present, filtered by stock exchange

Stock Exchange

 

Stock Exchange
Deal value ($m)
Number of IPOs
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IPO values by sector


How PwC can help you

At PwC, we understand that good preparation is essential to a successful IPO and debt issuance. We have experience in a wide range of international, regional and domestic IPOs and debt issuances, and can provide expert guidance from initial planning, through to execution and beyond.

IPO and debt preparation

Our IPO and debt Readiness Assessment is an early stage diagnostic review of the critical areas needed for a successful issuance. We highlight where current processes, procedures, structures and practices fall short of the requirements for a company whose securities are to be publicly traded and provide recommendations on how to address these gaps. Our assessment can be tailored to include these aspects as well as some broader areas such as business continuity and contingency planning.

IPO and debt execution

We work with issuers and their advisors to provide IPO and debt advisory and assurance services. This may include working capital reporting, financial due diligence, financial positions and prospects procedures assessment, assistance with MD&A drafting in relation to a prospectus, comfort letters and project management.

Authors

Muhammad Hassan

Capital Markets Leader, PwC Middle East

Alex Tsui

Senior Manager, Capital Markets, PwC Middle East

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Abdelkhaleq Ahmad

Abdelkhaleq Ahmad

Consulting COO and Management Consulting co-Lead Partner, PwC Middle East

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Muhammad Hassan

Muhammad Hassan

Capital Markets Leader, PwC Middle East

Tel: +971 4 3043443

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