Fitch expects IPO momentum in GCC to continue in 2024

Government pledges for privatization will drive the momentum of initial public offerings in the Gulf Cooperation Council region in 2024, according to Fitch Ratings.

In its latest report, the credit rating agency said that the sale of minority stakes by government-linked entities and the establishment of public subscription funds will also accelerate the number of IPOs in the region this year.

The study further noted that credit profiles of Financial Market Infrastructure companies in GCC markets continue to be supported by capital market reforms, resilient IPOs and fixed-income listings in 2024.

“Revenue mixes and product offerings of GCC FMIs remain less diverse and risk management frameworks less advanced than at those in more developed economies,” the report said.

According to the information, GCC capital markets witnessed strong growth in 2023 through sustained economic development underpinned by stable oil prices and a boost in non-oil sectors despite a global fall in IPO divisions and bond issuances.

The report added that Tadawul dominated the FMI sector in the region in terms of market capitalization, even when excluding the impact of the large IPO of Saudi Aramco in 2019.

Fitch noted that the energy field, in particular oil and gas, dominates market capitalization across GCC markets, accounting for over half the total at the end of 2023.

“Governments aim to attract investors through reforms, such as the establishment of IPO funds and the relaxation of foreign ownership restrictions, which is shown by the GCC’s increased share in emerging markets indices,” Fitch said.

In January, another study released by KAMCO Invest revealed that Saudi Arabia led the IPOs in the GCC region in 2023, with 35 out of the 46 offerings happening in the Kingdom.

According to the report, Saudi Arabia’s parallel market Nomu witnessed 27 IPOs in 2023, while the Tadawul All Share Index saw 8 deals.

KAMCO Invest further noted that the UAE continued its supremacy in terms of IPO proceeds in 2023, raking in almost 56.3 percent of the issuance proceeds at around $6.07 billion from its 8 listings.

Regarding the prospects for 2024, KAMCO Invest said that issuance proceeds would be dominated by fewer larger issues this year, while several smaller IPOs should debut on the markets, such as the Nomu.