Saudi Arabia Is Dominating MENA IPO Market

Saudi Arabia has been the best performing of all the emerging markets since the onset of the pandemic. the market capitalization of Saudi Arabia's Tadawul Exchange grew 24% annually to reach 3.19$ trillion in the first quarter of 2022. Saudi Arabia has also been seeing growing interest for IPO issuances and topped the GCC in terms of the number of listings in 2021where it accounted for 57% of IPOs in the region by numbers and generated 60% of the proceeds. This rise in IPOs in the kingdom, not only reflects the efforts the country is exerting to strengthen the economy as part of its vision of 2030 but also emphasizes the kingdom’s success in recovering from the pandemic, especially with the increased interest and participation of foreign investors

IPO Boom in The MENA Region

the recent movements in oil prices are fueling an IPO boom in the MENA region in 2022 helping it to surpass the European IPO market for the second time since the global financial crisis. the only other time that MENA IPOs have exceeded those in Europe since 2009 was in 2019 when Saudi Aramco completed the world’s biggest-ever IPO

Russia’s invasion of Ukraine and higher interest rates have put a lid on listings in all countries, but the Gulf has so far avoided most of the volatility and global investors have flocked to offerings in the region.

Saudi Arabia Riyadh 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 US and European institutions.

Aramco Case

Saudi Aramco went public with the world’s largest-ever IPO in 2019, which shares surging more than 15% in two days of trading and giving the state oil giant a valuation of $2 trillion, which at the time became the world’s most valuable publicly-traded company.

Saudi Arabia Has Been Positioning Itself as An Attractive Destination for Investors

Tadawul supports the Vision 2030 goals by increasing the private sector’s contribution to the economy, diversifying the economy through reduction of dependence on oil, drawing in more foreign investment, and growing the SME sector. Making Saudi Arabia a more investor-friendly entity has been a national priority. Some of the changes that support such an initiative include: setting up a dedicated team that caters to international investors, asset managers., index providers, and brokers, in addition to managing international outreach efforts.

There has been a big increase in the number of qualified foreign investors in Saudi Arabia, reaching more than 2500 investors in early 2021, and continues to grow weekly.

Capital Market Authority (CMA) Initiatives

CMA’s strategic plan 2021-2023 includes several initiatives focused on improving market attractiveness, increasing transparency in the financial market, and raising investors' awareness. The authority aims to list 68 new companies between 2021 and 2023. Moreover, CMA is focused on increasing institutional investor turnover to 41% of the total market turnover (36% in FY19) by FY23. These efforts would encourage investment in the capital market and make it more efficient.

Furthermore, to encourage private sector companies to list on Saudi Arabia Exchange, some incentives have been provided to the listed companies in cooperation with CMA and different government organizations. Below are some important incentives provided to the listed companies:

  • increased loan limits by the Saudi industrial development fund

  • The facilitated approval process to register joint ventures with foreign partners

  • increased funding percentage and credit service limits for each customer

  • Fast-track service from general authority for Zaka, Tax, and customer authority (ZATCA) to cater to requests from listed companies

  • Preference in business and government procurement (under competitions and government procurement rule)

  • Higher funding limits for projects in health education, and real estate development (Mega Projects)

  • The preferential interest rate on long-term project finances up to SAR 500mn for a single project, and up to SAR 1bn for multiple projects

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