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29 March 2024

Global slowdown hits Saudi IPO activity

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By Staff

The value of initial public offerings (IPOs) in Saudi Arabia plunged by nearly 66 per cent in the third quarter of 2011 because of weak investor appetite due to the global slowdown, the Gulf kingdom’s largest bank said on Tuesday.

Saudi Arabia, the largest Arab economy, witnessed two IPOs during the third quarter, namely in the cement sector and building and construction sector.

Their total value reached SR820.9 million ($3.07 billion) which represents a 66 per cent decline over the same period last year, National Commercial Bank (NCB) said in its weekly bulletin, sent to 'Emirates24|7'.

“The lack of primary market appetite can be attributed to the global turmoil and deteriorating investor sentiment,” it said.

“The risk-averse attitude of local investors triggered by global uncertainty pushed investors to seek safer assets. This concludes three IPOs in the Saudi market during this year with a total amount of SR1,170 million ($316m).”

The report noted that the Saudi economy has been able to withstand external shock as balance sheets have plenty of room to cushion global distress.

But it added that the latest IPO, Hail cement, witnessed oversubscription by 1.3 times emphasising the significantly lower appetite compared to pre-crisis levels.

Saudi Arabia was the only market in the GCC to witness activity in the primary market during the third quarter of 2011, NCB said, adding that the local market is expecting a further five IPOs before the end of 2011.

“If these announcements materialise, it will prove the resilience of the Saudi equity market to global turmoil and help support the main stock market index into the positive territory for this year.”