GCC Capital Markets Watch

Q4 2019

Saudi Aramco’s record breaking IPO topped both the GCC and global rankings with the highest proceeds for the year

Q4 was a remarkable quarter in terms of equity capital markets. USD 26bn was raised, primarily relating to the IPO of Saudi Aramco on Tadawul - the world’s highest value listing to date.

Two UAE based companies were listed on the London Stock Exchange in 2019. Network International, the largest payment service provider in the region, raised proceeds in excess of USD 1bn, making it the largest IPO on the London Stock Exchange since June 2017. Finablr, the owner of payment and foreign exchange solution providers Travelex and UAE Exchange, raised USD 398m.

The Sultanate of Oman is likely to contribute more to the GCC equity capital market in 2020. State-owned Oman Oil Company is reported to be in the process of seeking an IPO.

Trade agencies, the majority of which are family-owned businesses are likely to have a new avenue to IPO with the recent agency law proposed by the UAE government. The law will facilitate their conversion to public joint stock companies. These agencies form an integral part of the UAE economy. The proposed legislation is likely to have a positive impact on the region’s IPO activity.

It was an eventful year in the GCC debt market with Dubai becoming one of the largest global centres for sukuk listings by value. The Kingdom of Saudi Arabia was also active – the Ministry of Finance issued USD1.2bn worth of sukuk in Q4 alone.

Macro-economic and geopolitical uncertainties remain and are expected to continue in the near term. Inevitably these will have an impact on GCC market activity. Nevertheless, companies which are well prepared and have a strong investment case will continue to be able to benefit from the capital markets.

Mohamed ElBorno
Partner, PwC Middle East Head of Assurance

Initial Public Offerings (IPOs) 

GCC equity capital markets attracted significant global attention in Q4 2019 with the record-breaking IPO of Saudi Aramco on Tadawul

Overview

In contrast to the subdued IPO markets in the first three quarters of the year when only four IPOs took place, GCC countries witnessed as many IPOs in Q4 alone, generating total proceeds of USD 26.02bn, which represents 96% of the annual GCC IPO proceeds for 2019. The high proceeds were driven by the IPO of the world’s most valuable listed company, Saudi Aramco.

The energy industry led the equity market in Q4 2019 with the USD 25.6bn listing of Saudi Aramco on Tadawul and USD 23m listing of Musandam Power Company SAOG on Muscat Securities Market.

A year after the last IPO on Qatar Stock Exchange, Baladna was listed on it in Q4 2019, raising USD 395.51m.

Tadawul continued to be the front runner amongst the GCC stock markets in 2019 in terms of both number of listings and proceeds raised.

IPOs by country

3 IPOs from 3 different GCC countries accompanied the iconic Saudi Aramco IPO on Tadawul in Q4 2019

  Sector Money raised Exchange No. of shares offered
Saudi Arabian Oil Company (Saudi Aramco) Energy USD25.6 billion Tadawul 3 billion
Baladna Food and Beverages USD395.5 million Qatar Stock Exchange 1.4 billion
Musandam Power Company Energy USD23.4 million Muscat Securities Market
28.2 million

Market performance

The cumulative total return remained stable in Q4 for most equity markets except Boursa Kuwait, which reflected an upward trend

GCC equity markets performance by cumulative total return since 1 January 2018

Global IPOs 

Notwithstanding the significant proceeds from the IPO of Saudi Aramco in EMEA and multiple listings on Shanghai’s Star Market in Asia-Pacific, 2019 IPO volumes and proceeds were both lower than the previous two years

The global equity market was quieter in 2019. Impacted by the geopolitical and economic uncertainty, investors are focusing more on IPO pricing and in particular for growth companies, a clear pathway to profitability. This could be readily observed in the US, with Uber, Lyft and Pinterest all completing their IPOs, but with pricing challenges, and with the high-profile collapse of the Wework IPO.

Cross-border activity remain an important factor for IPO levels with observable trends continuing for technology companies to look to the New York markets and companies from Africa, the Middle East and the CEE looking to London.

2019 was nonetheless a strong quarter, fairing better than the equivalent quarter in 2018 in terms of both proceeds and volume. Globally, 338 IPOs raised USD 71bn in Q4 2019 compared to 303 IPOs with proceeds of USD 57.6n in Q4 2018.

The Americas continued to lead the equity market during the year, accounting for 37% (USD 74.1bn) of proceeds and 24% (251) of the number of IPOs, supported by high value IPOs in the year – Uber, Avantor and Lyft being the prominent ones.

Asia-Pacific came second, contributing 36% (USD 71.7bn) of the global proceeds and 63% (660) of the number of IPOs. Hong Kong continued to be the most popular listing location with 35% of the region’s IPOs, closely followed by China (34%).

Coming third was EMEA which accounted for 27% (USD 53.3bn) of IPO proceeds, and 12% (129) of the number of transactions.

Global IPO activity
Top exchanges by % of total IPO proceeds raised
Top 3 global IPOs in Q4 2019 by proceeds
Saudi Aramco
  • Exchange: Tadawul
  • Pricing date: 5 Dec 2019
  • Money raised: USD 25.6bn
  • Free Float: 1.5%
XP
  • Exchange: Nasdaq
  • Pricing date: 10 Dec 2019
  • Money raised: USD 2.3bn
  • Free Float: 15.1%
Francaise Des Jeux
  • Exchange: Euronext Paris
  • Pricing date: 20 Nov 2019
  • Money raised: USD 2.0bn
  • Free Float: 48.4%

GCC bond and sukuk issuances

GCC market continues to host high value sovereign sukuk and bonds issuance

Q4 2019 experienced multiple high value transactions with sovereign and corporate sukuks dominating the market.

Islamic Development Bank, through IDB Trust Services Limited, issued its first green sukuk worth EUR 1bn on Nasdaq Dubai in Q4. Including the green sukuk and two issues of USD 1.5bn each in 2019 (April and October), IDB Trust Service Limited has 11 sukuks with a total value of USD 13.65bn listed on Nasdaq Dubai.

Emirate of Sharjah also issued a USD 750m sukuk during the quarter on Nasdaq Dubai following a USD 1bn issuance in April.

Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch issued two bonds of USD 500m each in October 2019 on Nasdaq Dubai. The move helped the bank secure the position of the largest overseas bond issuer listed on the exchange by value with total listed bonds value of USD 4.56bn.

USD 1.18bn
Total value of sovereign sukuk issued in Q4 2019 by the Kingdom of Saudi Arabia

The Kingdom of Saudi Arabia issued USD 490m of 10 year sukuk with a coupon rate of 2.69%, and USD 686m of five-year sukuk with a coupon rate of 2.17%.

USD 1bn
Total value of corporate bond issued by Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch in Q4 2019

Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch issued a 3 and a 5 year bond of USD 500m each on 17 October 2019, with a coupon rate of 2.662% and 2.772%, respectively.

USD 2.86bn
Total value of sukuk issuances in Q4 2019 by IDB Trust Services Limited on Nasdaq Dubai

IDB Trust Services Limited issued USD 1.5bn worth of sukuk on Nasdaq Dubai on 3 Oct 2019 with a coupon rate of 1.957%, EUR 1bn (USD 1.11bn) worth of green sukuk on 4 December 2019, with a coupon rate of 0.037% and USD 250m worth of sukuk on 11 December 2019, with a coupon rate of 2%. All sukuks will mature in 5 years.

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.

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.

Contact us

Mohamed ElBorno

Mohamed ElBorno

Assurance Leader, PwC Middle East

Tel: +971 4304 3100

Muhammad Hassan

Muhammad Hassan

Partner, Capital Markets, PwC Middle East

Tel: +971 4 3043443

Sergiu Gherasim

Sergiu Gherasim

Partner, Capital Markets, PwC Middle East

Tel: +966 (11) 2110400

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