In 2024, the stock markets in the Middle East and North Africa (MENA) region are gearing up for a busy year, especially in terms of initial public offerings (IPOs). About 30 companies from MENA are getting ready to launch IPOs this year, with a focus on Saudi Arabia and the UAE. Some prominent companies considering IPOs include Saudi Aramco, thinking about selling more shares on Riyadh’s stock exchange after its huge $29 billion IPO between 2019 and 2020 and Abu Dhabi based retail chain Lulu, planning a $1 billion share sale towards the end of 2024. Despite challenges like oil price fluctuations and a stronger dollar affecting investor sentiment, the region is anticipated to have a strong year for IPOs. In 2023, MENA saw IPOs raising $10.7 billion, which was a decrease of 51 percent from the previous year with fewer IPOs at 48. However, contributions from key IPOs like Arabian Drilling and Saudi Aramco Base Oil Co played a significant role in total proceeds.

The GCC markets performed well in 2023 with 47 IPOs raising $10.6 billion collectively. ADNOC Gas Plc and ADNOC Logistics and Services PLC stood out as major players in the IPO market, with ADNOC Gas raising $2.5 billion. The GCC IPO landscape showed strong performance post IPO, with around two thirds of IPOs experiencing share price growth. Tadawul emerged as the busiest exchange in the region, hosting a majority of IPOs. The last quarter of the year was particularly active, representing 40% of IPO volumes and nearly half of the total yearly proceeds. The MENA region’s focus on diversification beyond natural resources continues to drive IPO activity across various sectors, reflecting a robust and resilient capital market environment.

Moreover, the MENA region’s representation in the MSCI Emerging Markets Index has notably increased from 1.6% in 2016 to 7.7% in 2022, primarily due to reforms like IPOs, privatization efforts and raised foreign ownership limits. Saudi Arabia holds the largest market weight within this index. Despite global uncertainties, MENA equity markets show promise backed by economic diversification efforts and investments supported by sovereign wealth funds.

The rise in IPO activities and MENA’s growing influence on global equity indexes highlight the region’s expanding role on the world financial platform, presenting both opportunities and challenges for investors looking ahead to 2024.

Three 3 Reasons for Growth

The growing significance of the MENA region in the global stock market, particularly evident through its rising participation in IPOs and increased weighting in the MSCI Emerging Markets Index, brings unique benefits and opportunities;

Expanding Investment Options: With a notable presence in IPOs spanning beyond traditional sectors like oil and energy, the MENA region offers a wide range of investment prospects. This diversification enables investors to explore various industries such as retail, pharmaceuticals, logistics and services, helping to spread risk by investing across multiple sectors. The upcoming public offerings from companies such as Saudi Aramco and Lulu showcase the evolving market landscape in the region with promising growth opportunities across different sectors.

Enhanced International Presence and Investment Influx:

The MENA region’s amplified representation in the MSCI Emerging Markets Index, climbing from 1.6% in 2016 to 7.7% by 2022, signifies its increasing appeal to global investors. This uptick not only highlights the region’s economic reforms and liberalized markets but also attracts more foreign capital, fostering a positive cycle of investment and development.
With Saudi Arabia playing a significant role in the index, it shows global investors that the region’s markets are developing and expanding, attracting more foreign investment.

The positive impact on the economy and the market’s resilience:

The active IPO market and the strong performance of newly listed companies suggest a healthy and lively market environment that can withstand global economic uncertainties. In 2023, about two thirds of all GCC IPOs experienced an increase in share prices after going public, boosting investor confidence essential for long term economic stability and growth. Moreover, the region’s efforts to diversify strategically help reduce its reliance on oil, creating a more resilient and varied economy capable of navigating global market changes and geopolitical tensions.

These combined factors point to a promising environment for growth and success in MENA equity markets, giving both local and international investors compelling reasons to participate in this dynamic market.