Dubai
Credit Suisse is much more constructive on the IPO of the Adnoc unit compared to the recently concluded primary offering of Emaar Development, its head of research said on Thursday.
Adnoc’s unit for distribution plans to raise $2.8 billion by selling up to 20 per cent stake in the company, following Emaar Properties raising $1.3 billion from the IPO of its unit earlier this month, which received a lukewarm response.
“We believe the market’s response to the Adnoc unit IPO will most likely be different from Emaar Development’s more difficult experience. For one thing, Emaar Development involved another real estate name in a market where the sector is already very dominant. In contrast, with Adnoc this marks the first time a business of this type is being privatised and it offers exposure to a sector that has been notably absent in the market,” Fahd Iqbal, Head of Middle East Research, Private Banking at Credit Suisse told Gulf News.
Adnoc for Distribution will list on Abu Dhabi Securities Exchange next month, through which investors will get access to an energy company in addition to other sectors on the bourse, which analysts say will increase the depth of the market.
Investor sentiment
However, geo-politics are weighing on investor sentiment, which resulted in a downgrade of Saudi markets to neutral.
“Geo-politics are definitely weighing on investor sentiment and we are seeing the impact on trading volumes. There is near-term uncertainty on how events will develop, and any moves toward mediation will be taken positively, but I don’t think anyone is expecting all of the issues to be resolved in the short-term,” Iqbal said.
Credit Suisse is still positive on the potential for Saudi to be upgraded to emerging market status by FTSE and MSCI next year.
“We still have a few months to go before any announcement is made. A positive announcement by either would be enough to trigger a re-rating, but investors are not in a rush to buy into Saudi given the near term uncertainty,” he added.
Credit Suisse is still positive on UAE, Kuwait and Egyptian equities, and will use any sell-off as a buying opportunity.
Saudi’s Tadawul index has gained 4.66 per cent in the year so far, compared to 7.55 per cent gains in Dubai index.
