A recent economic report predicted that the Saudi IPO market will witness over ten listings in 2021. It also pointed out that Q4 of 2020 showed positive indicators on both returns and the desire for listing companies in the Saudi stock exchange, Tadawul.
The record increase in appetite for listings can be traced back to the revitalization of various sectors such as banking and petrochemicals, recovering oil prices, the optimism surrounding Saudi Arabia’s national economic vision.
It is also connected to the repercussions of the coronavirus pandemic beginning to phase away.
Saudi Arabia’s benchmark Tadawul All Share Index (TASI) registered on Sunday the highest close since 2015 by gaining 76.82 points and closing at 9,664.61 points.
The total value of the trading reported was SR 12.4 billion ($3.2 billion), while the toll of shares traded was more than 445 million, divided into over 480,000 deals.
“The positive developments brought about by changes in the Saudi financial market have contributed to the good performance during the pandemic and the financial market infrastructure in general,” the chairperson of the Board of Directors of Tadawul, Sarah al-Suhaimi, told Asharq Al-Awsat.
Suhaimi indicated that these factors helped attract foreign investors.
“More than 380 foreign financial institutions were registered through the Qualified Foreign Institutional Investor (QFII) program during 2020, an increase of 23% since the beginning of the year and throughout the health crisis,” she revealed.
The figure, according to Suhaimi, represents a clear indication of foreign investors’ confidence in the Saudi financial market.
The market has addressed and responded quickly and effectively to the repercussions of the pandemic, she said.
Suhaimi further pointed to the work and cooperation with the Capital Market Authority to ensure that investors and listed securities are shielded from the impacts of the pandemic.
According to the Ernest and Young Middle East and North Africa (MENA) IPO Eye Q4 2020 report, the region saw nine IPOs raise proceeds of $1.86b, a fall of 40% in total issuances and 94% in total proceeds when compared with 2019.
Out of the nine issuances, 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.
“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,” said Matthew Benson, Ernest and Young MENA Strategy and Transactions Leader.
“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 programs will sustain positive IPO momentum,” he added.
Despite a drop of nearly 30% earlier in 2020, the Tadawul recovered to end 2020 with a positive index return of 3.6%, which was aided by the recovery in crude oil prices.
According to the report, Saudi Arabia continued to have the most active IPO market in the MENA region in terms of both issuances and proceeds. Tadawul was MENA’s top listing venue for the year with four listings totaling US$1.45b, which represented 78% of the total amount raised by MENA IPO candidates in 2020.
