Dubai: The pipeline of IPOs (Initial Public Offering) looks quite strong at least in the first half of 2015, but falling equity markets and crude oil prices might have a knock on impact in the later part of the year, PricewaterhouseCoopers said.
In the UAE, there has been two IPOs so far in the year. Elsewhere in Saudi Arabia, NCB’s $6 billion IPO next month is touted to be the second biggest after Alibaba’s $25 billion. It will also be the largest in the Middle East, surpassing the $5 billion raised by Dubai’s DP World in 2007.
“Indications are for a continued strong pipeline of IPOs in 2015 at least in the first half. In the Saudi market there is quiet a backlog of approvals, which will come in 2015, so there will be a relatively strong pipeline in 2015 due to that. And similarly in the UAE, we are seeing good pipeline when completed will come in 2015,” Steve Drake, Head of PwC’s Capital Markets team in the Middle East region told Gulf News.
However, the falling crude oil prices and equity markets could have a knock on impact in the second-half of the year.
“Ultimately equity markets are cyclical and we are starting to see downturn in the international markets like London and Hong Kong, and that might have a knock on impact on IPOs in the second half of next year,” Drake said.
“There has not been any indication of that, but on a longer-term that might be the case,” said Drake, when asked if falling equity markets or crude oil could have an impact on IPO pipeline in the second half of next year.”
In the past four weeks, European stocks led a rout that helped erase as much as $5.5 trillion from equities worldwide amid concern that a potential recession in the region would undermine growth as the Federal Reserve winds down its asset-purchase program.
“Equity valuations worldwide are in a downward trend, and generally what happens in the global market have an impact on the domestic market. There could be an impact in the second half on IPO pipeline,” said Drake.
Reviving bond issuance:
Bond issuance may continue with the revival in the fourth quarter to December as more companies seek financing and refinancing particularly infrastructure projects, PwC said.
Bonds issuances saw a rebound in September, with a $500 bond issue from Emirates NBD, Dubai’s biggest banker by asset, making them the biggest issuer of bonds on Nasdaq Dubai.
“We have seen an increase in number of issues tapping the bond market in order to support some of the projects. The demand would continue to finance these projects particular the infrastructure projects. If we look at a five-year period, we expect bond issuances to be quiet strong,” he said.
The first two months of the September quarter witnessed a traditional quiet period, with the political instability in the Middle East also contributed to the slowdown. So far this year, there have been about $20 billion of bonds and sukuk issued by borrowers in the UAE.
