Market Performance:

The MENA equity markets have shown mixed performance in the first half of 2024. As of June 21, 2024, the S&P Pan Arab Composite index is up 1.6% year-to-date. Among individual markets:

• The Egyptian Exchange (EGX30) has emerged as the top performer, gaining 8% in Q1 2024.
• Boursa Kuwait Premier Market followed with a 7.5% gain.
• Dubai Financial Market (DFM) rose 4.6% in Q1 2024.

IPO Activity:
IPO activity in the MENA region has remained robust in the first half of 2024, though slightly lower compared to the same period last year:

• In Q1 2024, there were 10 IPOs across the GCC, raising a total of $1.2 billion. This represents a 6% year-on-year decline in value.
• Saudi Arabia dominated the listing activity with 9 IPOs across diverse sectors.
• The UAE saw one significant IPO - Parkin Company PJSC, which raised $0.4 billion on the Dubai Financial Market (DFM).

Key Trends:

• Economic Growth: The International Monetary Fund (IMF) projects MENA's GDP growth to rise to 2.7% in 2024, up from 1.9% in 2023. However, this is still considered a tepid increase.
• Oil Prices: As of June 21, 2024, Brent crude oil prices are trading at $78.61 per barrel, expected to decline by 6.2% to $73.68 per barrel in 2025.
• Sector Performance: Consumer markets companies dominated IPO proceeds, accounting for 66% of the total in Q1 2024.
• Cross-border Activity: There has been an increase in outbound cross-border deals from the MENA region.
• Economic Diversification: GCC countries continue to focus on economic diversification, driving investments in non-oil sectors.

Outlook:
The outlook for MENA equity markets for the remainder of 2024 remains cautiously optimistic:

• IPO Pipeline: A strong pipeline of IPOs is expected, particularly from Saudi Arabia and the UAE.
• Economic Drivers: Economic diversification goals, decarbonization efforts, and a focus on localization and value creation are expected to drive market activity.
• Challenges: Geopolitical risks, including ongoing conflicts in the region, pose potential challenges to market stability.
• Sector Focus: Continued emphasis on technology, healthcare, and consumer sectors is anticipated.

Key Statistics (as of Q1 2024):

• Total IPO value: $1.2 billion
• Number of IPOs: 10
• Largest IPO: Parkin Company PJSC ($0.4 billion)
• Bond issuances: $1.6 billion
• Sukuk issuances: $4.6 billion

Recent Developments:

• On June 20, 2024, the Dubai Financial Market announced a periodic review of its General Market Index and Sharia Index, effective June 24, 2024.
• The UAE projects market remains robust, estimated at $590 billion as of Q1 2024, representing a 15% share of the overall MENA projects market.

In conclusion, while the MENA equity markets face challenges from global economic uncertainties and regional geopolitical risks, they continue to show resilience. The focus on economic diversification, strong IPO pipelines, and government-led initiatives are expected to support market growth in the second half of 2024.

Key factors driving the recent performance of MENA Equity Markets

Economic Diversification Efforts

Many countries in the MENA region, particularly the GCC nations, are actively pursuing economic diversification away from oil and gas. This is being driven by initiatives like Saudi Arabia's Vision 2030 and similar programs aimed at boosting the private sector's role in the economy.  The proceeds from elevated oil prices are being channeled into investments in non-oil sectors like technology, healthcare, consumer markets, and renewable energy.  This diversification push is fueling IPO activity and equity market growth across the region.

Elevated Oil Prices

The sharp rise in oil prices over the past couple of years has provided a significant boost to the largely oil-exporting MENA economies. Higher oil revenues have strengthened fiscal positions, enabling increased government spending and investment.  The low-cost oil production base in the region allows MENA markets to greatly benefit from elevated energy prices. 

Robust IPO Pipeline

There has been a resurgence of liquidity in MENA markets, driven by the economic recovery and high oil prices. This has set the stage for a flurry of IPOs across Saudi Arabia, UAE, Egypt and other markets, adding billions to the regional market capitalization.  The strong IPO pipeline, supported by government privatization programs, is expanding the investment universe and attracting new capital inflows.

Improving Liquidity and Market Reforms

Most GCC countries have enacted capital market reforms in recent years to upgrade regulations, allow greater foreign ownership, and boost liquidity.  Saudi Arabia, for instance, has taken steps like opening up to foreign investors, introducing a parallel market, and facilitating high-frequency trading, significantly improving liquidity. 

Favorable Macroeconomic Environment

The MENA region is well-positioned amid global headwinds, benefiting from dollar-pegged currencies that offset forex volatility, and positive market sentiment driven by economic growth prospects.  Factors like a young demographic profile and increasing domestic consumption are also supporting the equity market performance. In summary, the combination of economic diversification efforts, high energy prices, market reforms, robust IPO pipelines, and a favorable macroeconomic backdrop have all coalesced to drive the recent outperformance of MENA equity markets relative to global peers. However, geopolitical risks remain a key challenge for the region.

Conclusion

The first half of 2024 has shown a mixed yet resilient performance for the MENA equity markets. Key factors such as economic diversification efforts, elevated oil prices, and a robust IPO pipeline have been instrumental in driving market growth. Notable performers like the Egyptian Exchange and Boursa Kuwait have set a positive tone, while Saudi Arabia and the UAE have led IPO activities, raising substantial capital. Despite the challenges posed by geopolitical risks and global economic uncertainties, the outlook remains cautiously optimistic. Continued focus on economic diversification, technology, healthcare, and consumer sectors, coupled with strong government-led initiatives and market reforms, is expected to sustain and enhance market activity in the second half of the year. As MENA markets navigate through these dynamic times, their resilience and strategic advancements hold promise for continued growth and stability.

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