Arab IPOs Raised Over 10% Of The World's $71 Bn; The Trend In Iran Is In Reverse.

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BEIRUT - Arab initial public offerings (IPOs) in 2005 raised US$7.61 bn in capital, representing 10.7% of the total US$71 bn raised in IPOs worldwide. Most of the IPOs were conducted in the six-state Arab Gulf Co-operation Council (GCC) region. On the Persian side of the Gulf, however, the trend is in reverse; the Shi'ite theocracy of Iran is spending beyond its means on many geo-political pursuits and a nuclear project which, if things go wrong, could eventually cost it a US-led war.

In its third yearly Global IPO Trends Report released recently, the international accounting firm Ernst & Young said: "In terms of both number of deals and capital raised, 2005 was a watershed year for IPO activity in the Middle East".

Out of the total of 425 IPOs floated globally in 2005, 28 offerings were done in the Arab region. With an increasing appetite for IPOs, the IPO globalisation trend is set to continue through 2006, the report said. The year witnessed IPOs raising more than $500m each for companies based in the UAE, Saudi Arabia, Oman, Lebanon and Egypt. "As expected by market watchers, most of the region's IPO activity centered on utilities, oil and gas, real estate, banking and financial services", the report explained.

A distribution of IPOs by world regions in 2005 showed that Europe and the Middle East and Africa (EMEA) was the world's leading region by total capital raised in IPOs, with 42%; Asia was second ranked with 25%, followed by North America with 24%, Oceania 6%, and South America with 4%.

The biggest IPO was the US$9.2 bn launch of China Construction Bank. Second ranking fell to Electricite de France (EdF) with a value of about $8.2 bn. The UAE, ranked 9th by Ernest & Young among most active countries for IPOs in the EMEA region, saw issues worth $1.9 bn in 2005 compared to just $0.5 bn in 2004.

Saudi Arabia, ranked 10th among EMEA countries and second most active Arab country after the UAE, was reported as raising a cumulative capital of $1.67 bn in four IPOs.

Egypt raised $1.28 bn, while per-country IPO proceeds of companies from Oman, Lebanon, Qatar, Jordan and Kuwait each remained below the $1 bn level.

Although no company undertook an IPO on the Beirut Stock Exchange, Ernst & Young included Beirut-based Investcom as a Lebanon-based IPO in its report. Investcom last year became the first equity to list on the Dubai International Financial Exchange (DIFX).

With oil revenues of GCC states expected to exceed $300 bn in 2006, soaring liquidity in the region is an obvious explanation for the sharp rise in Arab/GCC activity. The report said: "In the next few years, assuming the necessary political stability, the Middle East is likely to increasingly become an important source of IPO activity as oil revenues are recycled into the local economy".

In 2005, it said, 70 countries around the world hosted IPOs, reflecting the changing pattern of the global economy with increasing numbers of IPOs by firms from emerging markets, particularly China, Russia and the GCC.

Companies continued to look beyond their frontiers to list, with increasing numbers of cross-border deals completed in 2005. A total of 154 companies elected to list in foreign countries, a 31.6% increase from 2004.

The report said: "The landscape is continuing to widen and we now see a healthy pipeline of IPO candidates waiting in the wings in markets around the world. A vigorous competition for new business by the world's stock exchanges promises well for the IPO supply in 2006".