Middle East companies launched fewer initial public offerings (IPOs) in the first half compared with a year earlier as choppy regional markets and concerns over the global financial crisis weighed on sentiment, Zawya.com data showed. Capital raised through IPOs in the region fell 87 percent in the first six months compared with a year earlier and the size of the average offering size sliced in half, according to Zawya.com. “I would not anticipate a surge in public deals in Q4, although within HSBC we are aware of a number of potential issuers who are waiting on the side-lines for the IPO window to reopen,” said Michael Bevan, HSBC Holding PLC's regional head of Equity Capital Markets. Despite the year-on-year decline IPO activity quarter to quarter increased in the region. Seven IPOs raised $1.13 billion in the second quarter, compared with $83.6 million raised by two IPOs in the first three months, the data compiled by Zawya.com shows. Vodafone Qatar, a unit of UK-based Vodafone Group, raised in April $952 million when it offered 40 percent of its shares on the Qatar stock exchange. The company said the IPO was fully subscribed and that there was “huge interest from both individual and institutional investors.” “I think we've had very good dialogue on the back of that IPO, because it shows those deals can happen,” Bevan said, adding that market conditions across the Gulf states “have certainly improved from the depths of despair in Q1 and there certainly seems to be stronger sentiment among investors.” Of the nine total IPOs in the first half of the year, six are listed on the Saudi market. Saudi Steel Pipe Company, which launched an IPO valued at $106.8 million last month, is the second largest-deal in the region. Books close for the IPO next week, and its retail tranche was covered almost threefold in the first five days of the share sale. Analysts expect companies to wait until the end of the year before launching new IPOs, partly due to the Muslim month of Ramadan coming in mid-August and subsequent slowdown in summer business activity especially in the Gulf. “Looking forward, I anticipate a period of weakness and higher volatility in the markets as investors close their books for the summer and liquidity falls,” Bevan said. Poor performing regional stock markets deterred companies from listing their shares on the market this year, as Persian Gulf states grappled with a global financial crisis. The value of shares traded on the bourses of Gulf states fell 48 percent to $578.5 billion last year. “Visibility on the pipeline remains low as issuers don't want to announce intended transactions at this stage, however, we're certainly seeing increased interest in IPOs from clients,” said Christopher Laing, Deutsche Bank AG's co-head of emerging Europe, Middle East equity capital markets.
