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Middle East Report 2010| pfi| 17


The challenge for bankers is to


harness the hoped for positive results


a new issue has to be allocated to retail and this is typi- cally the case. On Al Khodari, 41.5% of the deal was allo- cated to retail with all orders fully allocated.


International heat


The lack of excitement from retail on Al Khodari was directly countered by the success of the institutional book- build. Like Nawras, Al Khodari marked a rare use of bookbuilding to set the offer price. The difference was that an institutional bookbuild took place first so that when subscription opened for retail investors the SR48 price had been set, from a SR48–SR51 price range. Institutions took to the bookbuilding process and the entire deal was covered by institutional orders that were then scaled back to accommodate retail. With Nawras also receiving the best support from institutions, including internationals, the result is count- er to the perception prior to launch that domestic retail would be guaranteed thanks to the lack of issuance and the true measure of success would be whether interna- tionals were willing to buy, and a rapid revival in emerg- ing market interest has ensured they are. “Emerging markets are currently witnessing a signifi- cant inflow of funds and a fair amount should be direct- ed to Middle Eastern markets,” said Evans Haji-Touma, head of CEEMEA equity capital markets at HSBC. “Debt markets have reopened in the Middle East, with the Dubai Gov- ernment and Emaar issues particularly prominent. “While there is a time lag between the Middle Eastern markets and other index markets such as Russia, Turkey or Poland, this renewed fixed-income activity should act as a catalyst for re-opening equity markets as a reduction in funding cost should have a positive impact on under- lying earnings and therefore valuations.”


Who’s next Already in the market is an IPO for Aluminium Bahrain , which will see the company list both domestically and with GDRs in London. The privatisation should raise around US$500m. Also launching in mid-October was the IPO of Axiom Telecom , which is set to break the two-year new issue drought in the UAE. Significantly the tele- coms company has also elected to list on the struggling Nasdaq Dubai bourse (formerly the DIFX), which has struggled to attract both liquidity and new listings. The hope is that as Nasdaq Dubai and the preferred, but locally focused, Dubai Financial Market are now on the


same trading platform, as of July 11, liquidity will improve as investors are now able to trade on both exchanges through one account. The consolidation of the two exchanges also saw minimum trading fees on Nas- daq Dubai reduced to the same level as for the DFM. Nasdaq Dubai appeals as a listing venue for banks keen to internationalise the markets as only on Nasdaq Dubai can IPOs be conducted using a bookbuild and also include international investors. Internationals can trade DFM stock, subject to some foreign ownership caps, but not participate in new issues.


“Issuers increasingly understand that while there are benefits to local markets like the DFM, these markets can have their limitations,” said Chris Laing, co-head of CEEMEA ECM at Deutsche Bank. “The DFM requires only primary shares are offered at IPO, so if a company has no need for capital then that effectively stops a com- pany from doing an IPO as it has no use of proceeds. That is not the case for Nasdaq Dubai and is one of several rea- sons why companies looking to IPO in Dubai should con- sider both exchanges, especially now that investors can now easily trade both post the DFM/ND merger.” The Axiom IPO was a little delayed in launching due to the threat of a ban on Blackberry handsets, but is on track to be priced in mid-November, with guidance sug- gesting a deal of around US$300m to be completed by Deutsche Bank, Citigroup and Shuaa Capital. It is not guaranteed that even a success for Axiom will lead to a flood of deals on the Nasdaq Dubai, as where the terms suit the DFM will still appeal. One banker currently working on a larger Dubai IPO for early next year said that the company would list on DFM, partly because of the ease of process for regional accounts that are still not com- fortable with bookbuilding.


Equally he suggested that the link of the two exchanges was likely to favour DFM more by making international access easier to the larger market, rather than see a dra- matic pick-up in local trading of the 11 companies that have ordinary shares or GDRs listed on ND. The challenge for bankers is to harness the hoped for positive results of the IPOs of Nawras, Alba and Axiom and convert these into IPO mandates across the region. Yet the pipeline remains small as a near two-year lull means few companies that were looking at IPOs then are still in the same situation. The availability of cheap money in the local markets is also making it difficult to get the best quality assets to come to market, especially at current valuations.


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Already in the market is an IPO is Aluminium Bahrain.


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