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December 10, 2022

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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 24.2% annually to reach $3.19 trillion in the first quarter of 2022, as it continues to have increased momentum.

Saudi Arabia has also been seeing growing interest for IPO issuances and topped the GCC in terms of the number of listings in 2021, where it accounted for 57% of IPOs in the region by numbers and generating 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 2030 but also emphasizes the kingdom's success in recovering from the pandemic, especially with the increased interest and participation of foreign investors.

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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. For example, Aramco posted its highest profit since its record stock market listing after oil prices jumped in the wake of the Ukraine war. This was also combined with supportive regional regulatory actions as well as a shift in investor sentiment back towards MENA markets.

* In Q1 2022, MENA Region saw a 400% Y-o-Y increase in the number of firms listing with 15 IPOs raising proceeds of $4 billion, a jump of 1,242% in value when compared to the same period in 2021. In contrast, global IPO volumes during Q1 2022 fell 37%, with proceeds down by 51% year-on-year. The year’s biggest IPOs in value in MENA in 2021 were in the utilities, energy and financial services sectors, with Saudi Arabia’s International Company for Water and Power Projects (ACWA Power Company) leading with proceeds of US$1.21 billion on the Tadawul.

* Saudi Arabia’s 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.

Saudi Arabia is “The Middle East’s Biggest IPO Market”

* Saudi companies raised almost $9.3bn from share offerings in 2021, making it one of the most active IPO markets in the Middle East and Africa, according to data compiled by Bloomberg.

* Saudi Arabia topped the region in terms of IPO issuances in 2021. There were 20 public listings of Saudi companies (9 on Tadawul and 11 on Nomu).

* The largest IPO during Q1 2022 for the MENA region was in Saudi Arabia, with Al Nahdi Medical Co. raising US$1.38 billion in the Kingdom’s biggest IPO since Saudi Aramco’s listing in 2019. Saudi Arabia’s digital security firm Elm Information Security Company had the second biggest IPO of the quarter, raising $819 million in proceeds.

* According to Tarek Fadlallah, chief executive officer of Nomura Asset Management, Middle East. “Sentiment in Saudi Arabia is bullish due to brisk economic activity, sequential gains in corporate profits, lucrative IPO activity, a strong real estate market, and very high oil prices.”

* The IPO pipeline remains strong, as the Tadawul Group chief executive announced 50 applications had been received for listing in 2022, out of which 20-25% are for main board listings.

* Tadawul is currently focusing on providing listed companies with new financing tools such as debt instruments to offer more options to clients with varied returns and risk.

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