Doha: The Mena region saw a total of nine IPOs in 2020, raising proceeds of $1.86bn, a fall of 40 percent in total issuances and 94 percent in total proceeds, when compared with 2019, according to the EY Mena IPO Eye Q4 2020 report.
In Qatar, QLM Life & Medical Insurance Company has raised $179.6m, and was the first IPO on the Qatar Stock Exchange (QSE) since the fourth quarter of 2019, making QLM the third-largest IPO of the Mena region during 2020. The report also highlighted that investor sentiment will likely improve following renewed relationship between Qatar and its GCC neighbors. The EY reiterated that out of the nine issuances in the region last year, six were in the real estate sector, of which two were real estate investment trusts (REITs), with the remaining in the health care, consumer staples and insurance sectors.
Despite a subdued annual picture, Q4 2020 rebounded after a quiet Q2 and one IPO in Q3, with four IPOs in the Mena region raising $925m in total. Although the number of IPOs decreased by 33 percent and proceeds were down 97 percent compared with the same quarter in 2019, Q4 did have the highest proceeds of 2020.
Globally, IPO numbers continued to pick up with 1,363 IPOs taking place in 2020, a 19 percent rise when compared with the previous year. Additionally, proceeds increased by 29 percent from 2019, rising to $268bn – the highest proceeds since 2010’s record of $290.2bn raised via 1,361 IPOs.
Matthew Benson, EY Mena Strategy and Transactions Leader, said: “A decline in economic growth and significant disruption across various industries caused by the COVID-19 pandemic, together with a decrease in demand for oil, had a considerable impact on Mena stock performances in 2020. Markets were also impacted at a global level. Market volatility in the first half of the year was higher than at any time since the global financial crisis, although it quickly subsided, and the latter half of the year presented some strong IPO market performances. As 2021 begins, we believe that continued fiscal stimulus measures, an abundance of liquidity and growing confidence in COVID-19 vaccination programmes will sustain positive IPO momentum.”
The QSE ended the year relatively flat, while the Boursa Kuwait index fell by 13 percent during the same period. The Egyptian Exchange (EGX) saw the biggest decline among the observed indices, having lost 22.3 percent. Equity markets in the Mena region experienced high volatility and average daily trading values increased significantly across the main exchanges.
Earlier in the year, following a meeting between the QSE and the Qatar Financial Market Authority (QFMA), there was news that book-building process would be introduced to market as well as talks about a potential price stability fund to ensure protection for individual and small investors.
In Q4 2020, the sovereign wealth fund of the State of Qatar, the Qatar Investment Authority (QIA), finalised its acquisition of a 10 percent stake in Borsa İstanbul A.Ş., the primary stock exchange operator in Turkey, for $200m. After relations between Qatar and the other GCC countries were restored in early 2021, investor sentiment is also expected to receive a boost, which will be beneficial for capital markets in Doha.
Gregory Hughes, EY Mena IPO and Transaction Diligence Leader, added: “Although Mena IPO activity remained relatively quiet in 2020, several regulators across the region announced positive regulatory changes during the year that bode well for future and existing public companies. As we start 2021, there are reasons for renewed optimism, and we see a strong IPO pipeline in key Mena markets and expect activity to pick up gradually during new year. We have also seen some interest in mergers with US-listed Special Purpose Acquisition Companies (SPACs) in recent months following some limited activity in this area in last two years from the region.”
