The IPO market has got off to a slow start in 2014, but is expected to pick up later in the year, with total offerings set to exceed US$ 1 billion, according to SICO Outlook findings released on Monday.
Market sentiment has improved, with 30 companies in 2013 announcing their intention to list. The report noted that regional IPO activity improved in 2013, with 11 companies listing, including two UAE companies on the London Stock Exchange, compared with nine companies in 2012. The Saudi market had the highest IPO activity, with five companies introduced to the exchange, followed by Oman with four.
Listings so far this year include ‘Takaful Oman Insurance’ on the Muscat Securities Market in February; and the ‘Saudi Marketing Company’ on Tadawul the same month. ‘Mesaieed Petrochemical Holding’s’ offering in January, which was oversubscribed six times and raised US$ 880 million, was followed by a listing on the Qatar Exchange in February. This is the country’s largest IPO for five years, and 43 companies are now listed on the Exchange.
GCC equities got off to a flying start in the first two months of 2014, with the UAE and Qatar markets showing substantial strength. Dubai and Abu Dhabi’s stock indices appreciated by 24.17 per cent and 15.2 percent respectively, on a very high turnover, and led largely by retail participation. Qatar rallied 13.41 per cent year to date and due to buying by foreign institutional investors.
Since the momentum shows no sign of abating in these two markets, investors are advised by the writers of the report to focus on earnings growth and not rely solely on a rise in multiples to drive stock returns, as has been the case for the past year. Thus a greater emphasis on earnings should be the case – stocks that have the most room for earnings growth and that can surprise on the upside, are the preferred picks.
The GCC equity markets performed strongly in 2013, with the S&P GCC Price Index increasing by 24.6 per cent. The equity markets of Dubai and Abu Dhabi were the star performers, growing 108 per cent and 63 per cent respectively. According to SICO, the stellar returns of 2013 are however unlikely to be repeated this year; with the bull market no longer able to thrive solely on the back of an expansion in stock multiples.
There are some important themes playing out, which will have an impact on GCC equities. These include the recently-introduced labour regulations in Saudi Arabia; the impact of the Expo 2020 award to Dubai, the FIFA World Cup 2022 to Qatar; the UAE and Qatar’s upgrade to emerging markets status by MSCI; and the possible merger of the DFM and Abu Dhabi indices.
The strategy report offers in-depth insight on these key themes for the GCC equity markets, plus an analysis of the main drivers for all major regional sectors; it also includes stock recommendations for investors in 2014. Of interest to the reader is that SICO Research’s stock picks in its previous 2013 strategy report have outperformed the broader benchmark S&P GCC Price Index by 24.2 per cent to date.
The report also highlights the prospects for global and regional economic growth. According to the IMF’s latest forecast, the world economy is predicted to grow to 3.7 per cent in 2014 from 3.0 per cent a year earlier; driven primarily by advanced economies, as the headwinds of fiscal austerity and deleveraging fade. A slowdown in growth in major emerging markets – in particular China, Russia, India and Mexico – is nevertheless creating a drag on overall global economic expansion. The IMF has revised its forecast for real GDP growth by the GCC region to 4.4 per cent in 2014, compared with 3.7 per cent the previous year.
“We are maintaining our Brent crude price assumption at US$ 100 per barrel for 2014. We expect oil prices to remain firm in the first half of the year on the back of supply outages in Libya, South Sudan and Nigeria and strong North American demand; although a weakness cannot be ruled out during the second six months of 2014. At this level, we expect all GCC economies, saves for Bahrain and Oman, to post surplus budgets for 2014, albeit with lower surpluses,” Nishit Lakhotia, Head of SICO Research, said.
Stepping up its 4th anniversary celebrations, VIVA has extended the free trial of its 4G LTE service until end of March 2014. VIVA customers can now continue to take advantage of the company’s state-of-the-art 4G network that boasts speeds of up to 100 Mbps with the widest coverage across Bahrain, offering an exceptional real-time video, media streaming and downloading experience with 24/7 connectivity.