Emerging Markets: Middle East

MIDDLE EAST

 

By Gordon Platt

 

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High point: Saudi Arabia dominates region’s IPOs

Companies based in Saudi Arabia led initial public offerings in the Middle East in the first half of 2010, but the United Arab Emirates is expected to take the lead in the second half. The biggest IPO in the region in the first six months of this year was by Knowledge Economic City, which raised $272 million, according to PricewaterhouseCoopers. The new city in Madinah province is expected to attract total investment of $7 billion.

 

Saudi Arabia accounted for seven of the eight IPOs in the region in the first half of 2010. The only non-Saudi IPO was in Qatar, where Mazaya Qatar Real Estate Development raised $144 million in the first quarter.

 

“Companies in the region will be eager to enter the IPO market as investor appetite grows stronger,” says Shailesh Dash, founder and CEO of Al Masah Capital, a Cayman Islands–based alternative asset manager that is active in the Middle East.

 

UAE-based companies are expected to raise $25 billion in IPOs this year, with much of that total dependent on a planned $15 billion IPO by Nakheel, according to a recent report by Al Masah. State-owned Nakheel, based in Dubai, borrowed heavily to finance construction projects during the city’s property boom. The company announced in July that a group of its creditors has supported a proposal to revise the terms of its $10.5 billion debt. The government paid off two Nahkeel sukuk totaling $5 billion last November after its former parent, Dubai World, said it would not be able to pay its debts on time.

 

There were 98 sukuk issues in the first half of 2010, up from 32 in the same period of last year, but the average issue size fell to $141 million from $223 million a year earlier, according to Standard and Poor’s. Asia accounted for 70% of this year’s first-half total of $13.7 billion, with the remaining 30% coming from the Arab Gulf.

 

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