JEDDAH: Major initial public offerings in the region are still scarce but banks are starting to win mandates again with consumer and healthcare companies expected to lead new equity listings, participants told the Reuters Middle East Summit. Thin volumes and high trading volatility - sparked mainly by regional retail investors - have sunk valuations on the region's exchanges and kept international institutions on the sidelines, awaiting clarity on companies' debt troubles. Middle East IPOs raised $1 billion in the first half of 2010, a report by Ernst & Young said in September, a 9 percent decrease from the same period a year ago. But a recent slew of deals is signaling a return of confidence. Dubai-based investment bank Shuaa Capital has mandates for five initial public offerings in the United Arab Emirates, which could be concluded in 2011. “We're seeing (the IPOs) in the consumer, food products sector and a lot of interest in healthcare,” Sameer Al-Ansari, chief executive of Shuaa Capital said. The Gulf IPO market came to a virtual standstill during the global financial crisis but has been slowly clawing back, though weak investor demand has pushed valuations down, deterring many issuers. UAE retailer Axiom Telecom plans to list a 35 percent stake on Nasdaq Dubai before the end of the year; Shuaa is a joint bookrunner on that deal. “This IPO is very important... for the whole market. It's the first step toward getting the capital markets functioning again (and) it opens up the market to other listings,” he said, adding the bank is also working on deals in Saudi Arabia. Prior to the global financial downturn, which hit the region hard, Gulf equity markets saw a flurry of new listings in the real estate and financial services sectors. “As you get stability in the equity markets and some confidence returning, IPOs will come back but the nature of IPOs will be different,” said Abdul Kadir Hussain, chief executive at Mashreq Capital, the investment banking and asset management arm of Dubai's Mashreq Bank. “I think consumer related, energy-related firms will be important. I think the market in terms of property and construction is probably not ready for it yet.” With uncertainty surrounding regional debt troubles slowly lifting, new IPOs will slowly being to trickle through but specialists don't yet expect any major new listings. “Companies do need access to capital whether its through bond markets or through equity markets,” said Mohieddine Kronfol, an asset manager at Dubai-based Algebra Capital. “I think you will probably see an improvement but I wouldn't expect very large or substantial values of IPOs in the coming 12 months.” Separately, stocks declined in the Gulf region following the lead of global markets. The individual bourses of six Gulf countries took a beating Wednesday over concerns on the pace of global economies. Saudi Arabia's Tadawul All Share Index fell 0.53 percent to 6,230.15 points. Qatar's index lost 1.3 percent, the most since June 2 and Oman's MSM30 Index retreated 0.3 percent. Bahrain's gauge was little changed. The Kuwait SE Price Index dropped 0.3 percent Dhabi shares fell the most in more than two months, helping lead Persian Gulf markets lower, after China unexpectedly raised interest rates, stoking concern policy tightening may slow the global economic recovery. Emirates Telecommunications Corp., the largest phone company in the United Arab Emirates, retreated 2.1 percent after third-quarter profit dropped 23 percent. Abu Dhabi Commercial Bank PJSC slipped for a third day this week. The ADX General Index retreated 0.8 percent, the most since Aug. 12, to 2,786.49 at the 2 p.m. close in Abu Dhabi. The DFM General Index rose 0.6 percent, reversing an earlier loss. “A paucity of any local drivers means the MENA remained hitched to global markets,” said Julian Bruce, director of equity sales at EFG-Hermes Holding SAE in Dubai. Asian stocks fell after China yesterday raised borrowing costs for the first time since 2007 as policy makers try to curb lending and prevent asset-price bubbles. The MSCI Asia Pacific Index of regional shares declined as much as 1.2 percent. US stocks tumbled yesterday amid concern banks will be forced to buy back soured mortgages.
