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Middle Eastern companies no longer have to go to London or New York in search of big-ticket investors, with the likes of BlackRock Inc. flocking to the initial public offering boom in local markets.
Dubai Electricity & Water Authority’s IPO raised $6.1 billion last month, with major global investors BlackRock, Vanguard Group and Fidelity Investments buying into the deal, Bloomberg News reported. Fertiglobe plc’s Abu Dhabi listing in October drew investment from Singapore’s GIC Pte and U.S. hedge fund manager Jeff Ubben.
Businesses from the Middle East have a long history of going public in the U.K. and the U.S. to tap a deeper and more liquid pool of investors. Now, the region’s thriving domestic markets and vibrant IPO scene, which has sidestepped a global slowdown in listings, is bringing a growing cohort of international funds to local exchanges instead.
“Over the past nine months, we have seen a steady increase in international investor interest in the region,” said Samer Deghaili, head of capital markets for the Middle East, North Africa and Turkey at HSBC Holdings Plc. Funds are spending considerably more time on IPOs to balance their portfolios as the Middle East’s index weightings ramp up, he said.
While Russia’s invasion of Ukraine, soaring inflation and hawkish central bank policies have put a lid on IPOs globally, high oil prices and significant equity inflows have supported the flurry of listings in the energy-rich Persian Gulf. Many of the world’s best-performing stock markets this year are in the Middle East.
Some local firms are abandoning international listings altogether. A Dubai-based provider of waste-disposal services has ditched plans to go public in the U.S. through a blank-check merger in favor of a traditional IPO in either Saudi Arabia or the United Arab Emirates, Bloomberg News reported in April.
Still, some foreign investors may have reservations about investing in Middle Eastern companies, regardless of where they list. Two Abu-Dhabi-linked businesses that went public in London in recent years have since collapsed in scandal, eroding investor confidence in corporate governance standards in the region.
And there are signs the economic outlook for countries like Saudi Arabia is getting less rosy as price pressures start ramping up. The region is also vulnerable to swings in oil prices, while the potential of a European Union ban on Russian supplies has revealed struggles with capacity constraints among OPEC and its allies.
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