The GCC saw a rise in initial public offerings (IPOs) in 2022 despite volatility in secondary markets. The total number of IPOs in the region increased from 20 in 2021 to 48 in 2022, while proceeds from GCC issuers increased by 211% from $7.5bn to almost $23bn over the same period. In 2023 there were 47 listings on GCC exchanges, generating $10.6bn in proceeds. The number of successful IPOs in the region has resulted in greater interest from investors.
Success Amid Turbulence
The MSCI GCC Countries Combined Index reported a 6.9% growth in 2023, compared to a decrease of 4.1% during the previous year. However, the index, which includes 91 companies that account for roughly 85% of free float-adjusted market capitalisation in their countries, trailed the MSCI Frontier Markets Index’s 12.1% growth in 2023. Despite fluctuations in secondary markets, IPO activity remained robust in the GCC. The resilience was largely due to the confidence shown by regional issuers in the business fundamentals of their companies and their effective communication with the market, which helped generate a high level of investor appetite. Additionally, the performance of certain sectors in the region – such as technology and renewable energy – contributed to durability in the face of challenging global conditions.
The GCC has not experienced the same IPO downturn that has affected markets around the world. Global financial volatility has resulted in a drop in IPO activity outside the region, which has helped GCC companies sell equity at high valuations. In 2022 capital markets around the globe struggled due to various factors, including the impact of the Covid-19 pandemic, inflationary pressures, geopolitical tensions and decisions by central banks to tighten monetary policy. As a result, the frequency of equity issuance declined. Some countries even saw a halt in issuances, making 2022 a difficult year for IPOs. Compared to 2021, global IPO proceeds fell by more than 70%, with IPO earnings in US markets down 90%, and markets in the UK and Europe seeing a significant downturn. In 2022 IPOs generated $173bn in proceeds through 1154 IPOs, compared to $618bn via 2682 offerings in 2021. According to professional services provider Ernst & Young, 2023 saw global IPO volumes and proceeds fall further, down 8% and 33%, respectively, compared to 2022.
Regional Growth
GCC countries are a prime target for investors seeking to profit from high oil prices and other factors. Kuwait, Qatar, Saudi Arabia and the UAE collectively accounted for more than 7% of the MSCI Emerging Markets Index as of December 2022, a marked improvement on the GCC-wide share of 1.2% in 2017, according to a report from financial services firm EFG Hermes. Kuwait, which was added to the index in November 2020, has seven companies listed, accounting for a combined market capitalisation of $57bn and covering roughly 85% of the country’s equity universe.
Despite the risks posed by interest rate hikes, geopolitics, and the volatility in secondary stock markets and oil prices, 2022 saw strong IPO activity, with 48 IPOs bringing in $22.9bn. While 2023 saw 47 IPOs across the region, the amount raised – $10.6bn – was less than half of what was seen in 2023, reflecting global trends. The UAE was top in terms of IPO earnings, receiving 58% of issuance proceeds, or around $6.1bn, from its IPOs in 2023, while Saudi Arabia accounted for 31% of revenue generated by listings in the region.
The pipeline is likely to be strengthened in the coming years by continued efforts to privatise government-owned assets as part of the GCC’s broader economic diversification and private sector development plans. For example, Kuwait is undertaking a long-term divestment programme to privatise 40 government-run assets, and Boursa Kuwait was fully privatised in 2019 and self-listed the following year.
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