What Factors Are Driving the Boom?
Several factors have contributed to the success of GCC stock markets. One key factor is the relative resilience and immunity to global geopolitical events. The region’s stability and strong economic fundamentals have attracted passive index flows and increased index compiler weightings in favor of GCC stock exchanges. This has further boosted investor confidence and driven the surge in IPO activity.
The United Arab Emirates (UAE) has been at the forefront of capital market reforms, which have had a positive impact on both the Dubai Financial Markets (DFM) and the Abu Dhabi Securities Exchange (ADX). These reforms have not only increased the number of listings but have also raised the international profile of these markets. The result has been improved liquidity and increased interest from both domestic and international investors.
Another contributing factor to the rise of GCC stock markets is the region’s increased weight in the MSCI Emerging Markets Index. Over the years, the GCC’s weight in the index has grown from 1.6% in 2016 to 7.7% in 2022. This increase is a result of various capital market reforms, including IPOs, privatization, and higher foreign ownership limits. The GCC’s growing prominence in international indices has further enhanced investor confidence and attracted more capital to the region.
Success Stories in the GCC
The GCC’s stock markets have seen a flurry of successful IPOs, with some companies experiencing significant gains on their trading debut. For instance, ADNOC Group’s maritime logistics unit saw its share price surge over 50% on its first day of trading in Abu Dhabi. The overwhelming investor demand for ADNOC’s initial public offering demonstrates the confidence and appetite for GCC IPOs.
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The UAE market, in particular, has been a hotspot for IPO activity. In the first quarter of 2023, the UAE accounted for over 90% of the GCC’s IPO proceeds, raising $3 billion from two IPOs. Meanwhile, Saudi Arabia has dominated in terms of volume, with companies like Jamjoom Pharma and First Milling Company attracting significant investor interest.
Other GCC countries have also witnessed notable IPO activity. Oman’s Muscat Stock Exchange saw its largest listing since 2010 with the $244 million IPO of Abraj Energy Services. Qatar, too, has been implementing initiatives to support IPO issuances, such as its market-maker program, and plans to increase listings and introduce more exchange-traded funds and derivatives.
Driving Growth in the GCC
The GCC’s favorable climate for IPO issuances is expected to continue in the medium term. Capital market reforms, such as those being implemented in Qatar, are starting to yield results and stimulate listing activity. The outlook for IPOs in the whole MENA region remains positive, with multiple transactions expected to convert within the next 12 to 24 months.
To further encourage IPOs, exchanges in the region have implemented various initiatives. Abu Dhabi and Dubai, for example, have established IPO funds and reduced trading commissions to enhance market liquidity and attract more domestic listings. These efforts, combined with the GCC’s strong economic positioning and reach in the market, will continue to generate interest from international investors.
