News

Saudi opening up could slow down IPO pipeline

market index 410Saudi Arabia's decision to open its stock market to direct foreign investment could slow down initial public offerings (IPOs) in the country by making local companies wary of giving up stakes in their business to foreign control. “There are a lot of family conglomerates with, say, 20% on the Tadawul [the Saudi stock exchange],” says Khalid Murgian, managing director of Neuberger Berman in Dubai. “It will be anathema to them that some foreign manager can come and tell them how to manage their business. It may have a perverse effect of having fewer companies come to market.” The opening of the Saudi stock market, which is planned for the first half of 2015, could spur the development of activist shareholders in the kingdom, as qualified foreign institutions will be able to exercise voting rights for the first time. Previously, investors outside the Gulf region could only access the Saudi market through swap arrangements, with no voting rights. But Murgian says it is not only the mindset of Saudi companies that may resist foreign influence. Few stocks in the country are majority free floating, and in addition, the Saudi regulator, the Capital Market Authority (CMA), is likely to impose caps on foreign ownership. “The key for the CMA will be to help these mid-sized businesses understand why having foreign shareholders is an opportunity and not a threat,” he says. Saudi Arabia is one of the hottest markets for IPOs in the Middle East region, however a report by consultancy PwC on IPO activity in the first quarter suggested administrative delays were holding back issuance. “In Saudi Arabia there is a strong pipeline... but companies are taking time getting through the CMA review process,” said Steve Drake, head of PwC’s capital markets in the Middle East region, in the report. ©2014 funds europe

Executive Interviews

INTERVIEW: Totally mega

Jun 13, 2018

In 2016, global consulting firm PWC forecast the emergence of five global ‘megatrends’ in the next two decades. Stephen Anderson, its Middle East clients and markets leader, talks about their...

INTERVIEW: Protecting the investment

Nov 23, 2017

Rasmala’s trade finance fund recently passed $100 million in assets. Doug Bitcon, head of credit strategies, explains why he has to be hands-on.

Roundtables

MENA ROUNDTABLE: ‘The story is about reforms’

Jun 13, 2018

Our cross-industry panel discuss the positive backdrop in Egypt, the Dana Gas controversy and the potential index upgrades of Saudi Arabia and Kuwait. Chaired by George Mitton in Dubai.

SOUTH AFRICA ROUNDTABLE: Airline syndrome

Jun 13, 2018

Our panellists tell us that instead of launching competing national projects, African countries should work together for the sake of a bigger capital market. Chaired by George Mitton in Cape Town.