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French Version

IPOs assume growing importance in regional investment mix - report

Middle East IPO activities in 2005 raised $7.61 billion in capital, representing 10.7 percent of the total $71 billion raised in initial public offerings worldwide, international accounting firm Ernst & Young said in its third annual Global IPO Trends Report released this week.

"In terms of both number of deals and capital raised, 2005 was a watershed year for IPO activity in the Middle East," Ernst & Young said.

Out of the total 425 IPOs floated globally last year, 28 offerings were conducted in the region. With an increasing appetite for IPOs, the IPO globalization trend is set to continue through 2006, the report said.

The year witnessed IPOs raising more than $500 million each for companies based in the United Arab Emirates, Saudi Arabia, Oman, Lebanon and Egypt.

"As expected by market watchers, most of the region's IPO activity centered on utilities, oil and gas, real estate, banking and financial services," the report explained.

A distribution of IPOs by world regions in 2005 showed that Europe and the Middle East and Africa (EMEA) was the world's leading region by total capital raised in IPOs with 42 percent; Asia was second ranked with 25 percent, followed by North America with 24 percent, Oceania (6 percent), and South America with 4 percent.

The biggest deal of the year was the $9.2 billion launch of China Construction Bank, China's largest IPO. Second ranking fell to France's Electricite de France with a value of some $8.2 billion.

The U.A.E., ranked 9th by Ernest & Young among most active countries for IPOs in the EMEA region, saw issues worth $1.9 billion in 2005 compared to just $0.5 billion the year before.

Saudi Arabia, ranked 10th among EMEA countries and second most active Middle Eastern country after the U.A.E., was reported as raising a cumulative capital of $1.67 billion in four IPOs.

Egypt raised $1.28 billion, while per-country IPO proceeds of companies from Oman, Lebanon, Qatar, Jordan and Kuwait each remained below the $1 billion level.

Although no company undertook an IPO on the Beirut Stock Exchange, Ernst & Young included Beirut-based Investcom as a Lebanon-based IPO in its report. Investcom last year became the first equity to list on the Dubai International Financial Exchange (DIFX). With oil revenues of GCC states expected to exceed $300 billion in 2006, soaring liquidity in the region is an obvious explanation for the sharp rise in Middle Eastern activity.

"In the next few years, assuming the necessary political stability, the Middle East is likely to increasingly become an important source of IPO activity as oil revenues are recycled into the local economy," the report commented.

In 2005, 70 countries around the world hosted IPOs, reflecting the changing pattern of the global economy with increasing numbers of IPOs by companies from emerging markets, particularly China, Russia and the Middle East.

Companies continued to look beyond their borders to list, with increasing numbers of cross-border deals completed in 2005. A total of 154 companies elected to list in foreign countries, a 31.6 percent increase from 2004.

"The landscape is continuing to widen and we now see a healthy pipeline of IPO candidates waiting in the wings in markets around the world. A vigorous competition for new business by the world's stock exchanges promises well for the IPO supply in 2006," the report concluded.

Amman,04 18 2006
The Daily Star
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