The GCC region has witnessed a remarkable transformation in recent decades, with its public markets playing a pivotal role in the trajectory of its economies. These markets serve as key indicators of financial health and are significant for both large companies and new entrepreneurs alike.
If we look at the latest GCC data, in Q3 2023, six IPOs collectively raised USD 419m. Among these listings, five were in Saudi Arabia, while one was in Qatar. Meanwhile, in November 2023, it was announced that the Dubai Taxi Company is set to embark on a significant financial initiative, unveiling plans for an IPO that will see the company offering 25% of its overall issued share capital.
Let’s look at the key GCC exchanges, new moves by state-owned companies, and why the entrepreneur or small business owner can use this information to take the temperature of the economy to help inform their next move.
UAE public markets
As a global financial hotspot, the UAE boasts a robust framework for public markets, anchored by prominent exchanges. Investors navigate a spectrum of sectors, from energy and real estate to technology and finance.
There are a number of notable exchanges, including Dubai International Financial Centre (DIFC), Dubai Multi Commodities Centre (DMCC), Dubai Pearl Exchange (DPE), Dubai Diamond Exchange (DDE), and NASDAQ Dubai. However, the two most notable exchanges are:
- Abu Dhabi Securities Exchange (ADX): Established in 2000, ADX was founded with the primary objective of offering investment opportunities in securities to support the national economy. It focuses on fostering investment awareness to channel savings into productive sectors and upholding financial and economic stability. ADX is actively involved in trading equities, funds, and bonds.
- Recent ADX developments: Investcorp Capital, a Bahraini asset manager, successfully generated Dh1.66bn (USD 451m) through the sale of one-third of its shares to the public during its listing on ADX this year.
- Dubai Financial Market (DFM): Also founded in 2000, DFM was initially established as a public institution before transforming into a Public Joint Stock Company (PJSC). The sale of 20% of DFM’s shares for public subscription was a pioneering initiative in the region, and DFM is the world’s first financial market to adhere to Islamic Sharia rules. It is actively involved in trading equity instruments, debt instruments, exchange-traded funds (ETFs), securities lending and borrowing.
- Recent DFM developments: The big headlines are coming from the aforementioned Dubai Taxi Company, which is anticipating its inaugural dividend payout in April 2024 to be at least AED 71mn.
Both the Dubai Financial Market and Abu Dhabi Securities Exchange operate under the Securities and Commodities Authority.
UAE state companies IPO
The initiation of Dubai’s public offering for 10 state-owned companies is anticipated to act as a catalyst for growth, aiming to double the size of its capital market to Dh3tr (US 817bn) and attract foreign investment. So far, the Dubai Water and Electricity Authority (DEWA), has become the largest IPO in Europe and the Middle East since Aramco (back in 2019), raising USD 6.1bn.
Saudi Arabia’s public markets
Saudi Arabia’s public market is a nexus for global investors seeking opportunities in the Middle East’s largest economy, offering a sophisticated platform for investment across diverse sectors – from energy and petrochemicals to finance and emerging technologies.
The Saudi Arabian public market is Tadawul, with Nomu acting as a parallel equity market with lighter listing requirements.
- Tadawul: Operating as the stock exchange in Saudi Arabia, Tadawul was established in 2007 as a joint-stock company and is the exclusive entity authorised to function as a securities exchange in the country. It is included in global indices such as MSCI and FTSE and gained international attention with the historic IPO of the world’s largest oil company, Saudi Aramco. Surpassing giants like Apple and Google, Saudi Aramco is the world’s most profitable company, raising USD 12bn in 2019.
- Recent Tadawul developments: Jamjoom Pharmaceuticals became Saudi Arabia’s most significant IPO of 2023, raising USD 336m.
Saudi state-owned company IPO
In a strategic move, the country has initiated the process of allowing state-owned companies to conduct IPOs, marking a significant shift in Saudi’s economic landscape. This move opens up new avenues for public investment and aligns with the country’s broader Vision 2030 initiative, fostering transparency and diversification within its economy.
Saudia Technic, the aircraft maintenance subsidiary of the state-owned Saudia Group in Saudi Arabia, aims for a public share sale before the close of the decade and is currently strategising for an initial IPO in 2028 or 2029.
Implications for entrepreneurs
The performance and level of activity of these exchanges provide insights into the resilience and adaptability of the GCC’s economy as it further seeks to diversify from oil.
For entrepreneurs in the GCC, the developments in public markets present challenges and opportunities. The success stories of companies going public inspire confidence and encourage entrepreneurial endeavours. However, the volatility of markets underscores the importance of adaptability and strategic planning.
Entrepreneurs can leverage the insights from market trends to make informed decisions about the sectors they operate in and navigate the evolving economic landscape. Examining the performance of GCC public markets reveals patterns that reflect the broader economic health of the region. Fluctuations in oil prices, geopolitical developments, and global economic conditions all leave their imprint on the markets. The diversification efforts of these economies, with a focus on sectors like technology, renewable energy, and tourism, are also reflected in the market dynamics.
These are all methods of understanding the country’s economic position that entrepreneurs and small business owners can leverage as part of their decision-making process.
Let’s break them down in more detail:
- Market trends and economic indicators: Monitoring public markets in the GCC provides valuable insights into broader economic trends. Entrepreneurs can gain a deeper understanding of market sentiment, economic stability, and potential challenges, helping them make informed business decisions.
- Competitive landscape: Publicly traded companies often set benchmarks for industry standards and best practices. Keeping an eye on the public markets allows entrepreneurs to assess the competitive landscape, identify key players, and understand the strategies employed by successful businesses in their sector.
- Access to talent and partnerships: Publicly listed companies often attract top talent and strategic partnerships. Entrepreneurs can leverage this by keeping abreast of developments in the public markets to identify potential collaboration opportunities and talent acquisition strategies that align with their business objectives.
- Regulatory changes and compliance: Public markets are subject to regulatory changes that can have a cascading effect on businesses. Entrepreneurs who stay informed about these changes can proactively adapt their business strategies to remain compliant and mitigate potential risks.
- Investment opportunities: While not going public themselves, entrepreneurs can explore investment opportunities in publicly traded companies. Understanding the performance of these companies in the public markets can guide strategic investment decisions, allowing entrepreneurs to diversify their portfolios and potentially benefit from market trends.
Conclusion
The public markets in the GCC region, especially in the UAE and Saudi Arabia, serve as barometers for economic trends and opportunities. As state companies explore the public arena and global players make historic moves, the entrepreneurial landscape is evolving. Entrepreneurs can harness the lessons from these market dynamics to chart their courses in a rapidly changing economic environment, ensuring sustainable growth and resilience in the face of global challenges.
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