Investor confidence to boost Saudi IPO market

Initial public offerings (IPOs) in Saudi Arabia will bounce back this year after slackening in 2011 as the Gulf Kingdom’s bourse rebounds on resurging investor confidence, the country’s largest bank said on Tuesday.

Tadawul, the Middle East’s largest and busiest bourse, has over the past weeks breached levels unseen since 2008, which is expected to support primary issuances and business activity due to the favorable wealth effect, National Commercial Bank (NCB) said in its weekly market bulletin.

While the Kingdom’s economic fundamentals remained sound, Tadawul languished in the red in 2011, registering a 3.1 per cent decline as global pessimism and fear took hold of retail investors, who dominate more than 90 per cent of trading volumes in the Kingdom, the report said.

“The story has changed drastically in 2012 on the back of improved sentiment as corporate earnings rose by 21.5 per cent from SR78.1 bn to SR94.8 bn in 2011 and as Greece sovereign risks subsided.”

The report showed Tadawul’s index has gained around 19 per cent year to date with the heavyweight sectors, namely Telecom, Banking, Cement, and Petrochemical registering 34.3, 20, 20 and 10.8 per cent, respectively.

It said Investor appetite has increased considerably as witnessed by the increasing daily traded values that posted around SR21.6 bn in March, the most active session since 2006, and averaged nearlySR10.8 bn compared to SR4.4 bn last year.

“In our opinion, his elevated confidence is bound to trickle to the primary market in the near to medium-term, thus, we anticipate that most of the 10 announced IPOs might see the light this year as oversubscription and the total size of new offerings edge higher after falling in 2011 to a mere $461 mn and 1.28 times, respectively.”

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