Investors breathe a sigh of relief. A spate of debt issues and initial public offerings is set to inject new life into Middle East capital markets in the final quarter of what has otherwise been a lacklustre year.
Debt and equity capital market activity suffered in the first half of 2010 as a waning global recovery and debt worries in the European Union kept skittish investors stuck to safe-haven assets like gold and US treasury notes.
The traditional summer lull, coupled with the Muslim holy month of Ramadan, a period when business activity typically slows in the mostly-Muslim Middle East, did little to help.
But analysts say refinancing needs have prompted a raft of corporate and sovereign debt issues that could result in a modest rebound as the year draws to a close.
"There is a huge demand for capital because of massive spending plans by government and due to the restructuring that is taking place in the region," Jarmo Kotilaine, chief economist at NCB Capital in Riyadh, said.
"In simple terms, the pent up demand for capital is becoming more active."
Royal Bank of Scotland (RBS) forecasts up to $10 billion of bond sales in the Gulf Arab region in the fourth quarter alone, with issuers ranging from governments and state-owned entities to banks and other corporates.
On the sovereign side, investors showed strong interest in Wednesday's $1.25 billion dual-tranche bond from Dubai.
Investors were emboldened by creditors' near unanimous approval for Dubai World's debt restructuring plans.
The Dubai World debt plan has eased investor risk perception towards the emirate, with five-year credit default swaps (CDS) falling from a 2010 high of 655 basis points in mid-February to to around 420 basis points more recently.
Dubai World subsidiary Nakheel, builder of Dubai's palm-shaped islands, also plans to issue a Dh6 billion Islamic bond as part of its debt repayment plans.
Interest has been also underpinned by global asset manager BlackRock, which said in a recent presentation that yield-hungry investors were looking at emerging market debt issues from the six-member Gulf Cooperation Council where returns are seen as attractive.
On the corporate side, Burgan Bank, the commercial banking arm of Kuwait Projects Co, said on Sept 23 it had raised $400 million in a heavily oversubscribed sale of 10-year bonds.
Qatar Islamic Bank, the Gulf gas producer's largest Islamic lender, has mandated Credit Suisse, HSBC and QInvest for it its first dollar-denominated benchmark Islamic bond issue. Benchmark issues are usually $500 million plus.
Dubai's Emaar Properties plans to issue a $375 million convertible bond, while Saudi Arabia's APICORP plans to issue a Saudi riyal-denominated benchmark bond as it seeks to expand its loan and equity portfolios.
September also saw the start of a rebound in IPOs, a popular mode of fund-raising for Middle East companies that had almost dried up in the last two years as the financial crisis bit.
In the latest test of investor appetite for Middle East IPOs, Oman's telecom operator Nawras opened subscriptions for its offering on September 15.
UAE-based Axiom Telecom could be next in line according to sources with direct knowledge of the matter. Axiom, 40 per cent owned by a unit of the Dubai Holding conglomerate, is considering listing on Dubai's second index, Nasdaq Dubai.
Aluminium Bahrain, which is owned by the kingdom's sovereign wealth fund, also plans an IPO this year, its chairman has said.
Experts say appetite for these offerings is expected to be strong but pricing could be crucial and may have to take into consideration the cautious market environment.
"IPOs which were in the pipeline for some time are expected to come to the market due to improved sentiment," said Ajeev Gopinath, associate vice president for asset management at Gulf Baader Capital Markets in Muscat.
"Recent issues getting subscribed by investors would indicate appetite in the region. Pricing will be an important factor that will drive interest in current market conditions."
Further IPOs could come from the energy, telecom and retail sectors and from the sale of government-owned assets, experts say, a stark contrast to the focus on real estate and financial equity issuance in the pre-crisis days.