Transcript
Speaker: Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
Speaker: Make sure you're subscribed to stay up to date with new episodes.
Speaker: Thanks for listening.
Speaker: And now onto today's show.
Speaker: So the global IPO landscape in 2022 was dominated by the Gulf countries.
Speaker: We'll put a spotlight on initial public offerings in the region.
Speaker: Colin Milton, listing specialist, Qatar stock exchange may have a tell.
Speaker: Chief of Listings Saudi Exchange, Soheb Gizali, Manager, Business and Market Development Abu Dhabi Securities Exchange, Tahir Mahmood, Head of Business Development Dubai Financial Market and NASDAQ Dubai, and last but not least, Fauzi Sabag.
Speaker: Director head of equity sales mean at HSBC will discuss the recent IPO trends in the region key successes and examine future opportunities and challenges.
Speaker: Thank you very much.
Speaker: So let me begin directly with with knife.
Speaker: The Saudi exchange has now 23 companies on the runway to IPO and it's reviewing 77.
Speaker: It might change by a day and every other day across the main normal and direct channels.
Speaker: The Saudi exchange is attracting robust foreign info, obviously through the CUFI as well.
Speaker: And the topic on the mind of many, many, and specifically just recently now, the allocation of IPOs and the allocation process.
Speaker: What is the allocation process, if you can take us through it?
Speaker: And what is usually the split of foreigners versus local institutions?
Speaker: Well, thank you very much.
Speaker: I'll try to run you through what has happened over the last five years to try and convince investors, if we have any in the room, that we've managed to change some things, at least in Saudi, to try and accommodate for all types of investors.
Speaker: But the biggest change we've done is to make the framework and the way book building works in Saudi discretionary.
Speaker: And today it's down to the issuer and down to the lead manager and the book runners to be able to allocate shares towards one investor versus the other based on full discretion.
Speaker: Now, the result of that is we saw that around 20% of the book, the institutional book or the institutional trench went to internationals.
Speaker: versus that being around 5-7% over the last, I would say, 5-7 years.
Speaker: Over the last two years, that improved by five-folds up to around 20%.
Speaker: And we feel like that is still yet to be improved.
Speaker: You know, we still work on further institutionalizing the market.
Speaker: And, you know, we're today from a holistic view, we are at 90 percent retail institutional and 10 percent retail.
Speaker: And we've seen, you know, IPOs that, you know, hovered around, say, the 30 percent retail, 60 percent, 40 percent institutional.
Speaker: You know, the work being done by the Saudis Dower Group and the Saudi Exchange is to further, you know, take that higher to 95, 97, and even to 100% at one stage when everyone is ready.
Speaker: Tahir, if I can jump to you.
Speaker: So we've seen in the past few years, you know, all of the reforms, whether from the visa reforms, the family law reforms.
Speaker: What are the opportunities as part of these reforms to attract listings on the BFM and Nasdaq Dubai, especially for family offices, SMEs and startups?
Speaker: Thank you.
Speaker: Let me concentrate on Dubai, what's been going on in Dubai.
Speaker: For those of you who aren't aware about the capital markets program we have going here in Dubai, the leadership announced essentially three key pillars.
Speaker: The first one was IPOs, so the government announced that they will IPO 10 of the government companies in Dubai.
Speaker: The second one was focused around liquidity, essentially two key areas.
Speaker: One is the secondary liquidity on the market, so creating a market maker to support that liquidity, along with the private market.
Speaker: So we obviously want to bring some of our companies in an early stage, growth stage, up for them to be ready to IPO, and that's where the tech fund was established.
Speaker: and Dubai Future Fund to invest in some of the tech businesses in Dubai.
Speaker: And the third one was from a legal and regulatory perspective, where we want to see reforms to align the regulations that we have here in the country to international standards.
Speaker: We already launched the growth market on NASDAQ Dubai a couple of years back.
Speaker: But again, there are still challenges SMEs are facing when it comes to public markets.
Speaker: And this is what we are trying to resolve to make sure that
Speaker: For SMEs to do an IPO is efficient for them, but it's also practical for them to do that.
Speaker: Colin, I'm going to jump into you.
Speaker: We saw in the news that Qatar Stock Exchange will start focusing, it always has focused, but now it's more and more in the headlines, on the equity capital markets through boosting liquidity and encouraging, hopefully, the primary market in 2023.
Speaker: Can you shed some colors on the plans for the Qatar Stock Exchange in 2023, please?
Speaker: Sure.
Speaker: I think from a capital markets perspective and particularly from an IPO perspective that we tend to work in lead times of years, not months.
Speaker: I think the family businesses, of course, are very instrumental to everything that happens in the GCC, but they're extremely time sensitive, not just time sensitive with regard to the market cycle.
Speaker: but very time sensitive as to whether it's the correct time for those owners as families to come.
Speaker: Is it the first generation?
Speaker: Is it the second generation?
Speaker: Is it the correct time to hand over to the sons and daughters?
Speaker: Is it the right time in the growth of the business?
Speaker: We have had three mid-size transactions this year, which again is where our focus will be.
Speaker: But at the moment we've done a direct listing of a bank, we've done a promotion from the venture market to the main market,
Speaker: We've done a spin-off in the insurance company, again, mid-market, small family-type businesses, and I expect that to continue.
Speaker: So, hey, we had a discussion a couple of weeks ago.
Speaker: And I was confused myself between the concurrent listing and the dual listing.
Speaker: I'm sure you're going to give us a bit more color.
Speaker: But Americana listed on both the ADX and the Tadawil.
Speaker: So congratulations, first of all, to you and to Naif on this.
Speaker: Can you take us through the challenges you faced?
Speaker: And is this the future?
Speaker: Are we going to see more of these dual concurrent listings?
Speaker: Is this the future of this region?
Speaker: Let me clear up Americana.
Speaker: I mean, on a standard plate, it is a dual listing.
Speaker: However, because of the nature of the transaction, we call it concurrent listing.
Speaker: Now, the difference between a dual listing and a concurrent listing per se is, and this is first of its kind in the region.
Speaker: and hopefully a lot more to come as we go along during the year and in the years ahead.
Speaker: The concurrent listing, when we say concurrent listing, it's bell ringing at the same time in both the exchanges.
Speaker: UAE is one hour ahead of Saudi, and we had to open our market, especially for that particular script, a little later.
Speaker: So we had to do a bell-ringing session for Americana at 11 o'clock when Saudi was open.
Speaker: A bit of challenge, but we did achieve that and make sure that both the exchanges are in line, in par,
Speaker: and make this a successful transaction.
Speaker: One of the positive things is after the listing of Americana and after the post-listing success of Americana, we do are getting a lot of inquiries and a lot of quality leads coming with similar nature, not just from the region, but from global landscape, where in the companies that are looking at London or Far East or New York,
Speaker: they do want to see if there is a possibility of doing a similar nature transaction in ADX to manage the liquidity, to get access to more liquidity from the region as well as an international.
Speaker: So that's a very positive moment from this exercise.
Speaker: And we do hope to continue a lot more in the near future.
Speaker: Hopefully it's going to be exciting times.
Speaker: What have been the key factors and differentiators of this part of the world versus the rest of the world versus the...
Speaker: XYZ versus the rest of the world, what would have been the anchor of this part of the world in the past year to attract such flurries of IPOs?
Speaker: So just to put things into context, it was what, 23, 24 billion in the region?
Speaker: Whatever number, it was a big number compared to what we've seen historically.
Speaker: Over the last two years, the region has performed absolutely fantastic.
Speaker: So why is that?
Speaker: I think, you know, we've seen the government support, whether it's UAE, Dubai, Abu Dhabi, whether it's Saudi Arabia, what we're seeing in Qatar, Oman, elsewhere.
Speaker: It's the government that's supporting, that's, as I said earlier, it's stimulating the market.
Speaker: what other IPOs we're seeing.
Speaker: Look, for us, from when we were in discussion with the government, it was a matter of
Speaker: Institution which people can relate to, household names, Diwa, Salik, everyone who's in Dubai or the UAE is familiar with who Diwa and Salik are.
Speaker: So it's bringing the right companies to market and that just didn't generate interest here, globally it generated interest.
Speaker: Then the other factor is we all have very strong local domestic markets.
Speaker: And that really helps because what foreign investors want to see, they want to see liquidity in the local market.
Speaker: And that's something that has really supported us as well.
Speaker: The other key thing, and for us, and I'm sure the other markets are looking at it as well, is
Speaker: diversification, right?
Speaker: Prior to D-Waz IPO, nearly 80% of the market cap on DFM was either financial institutions or real estate and construction.
Speaker: And that's where investors kept saying to us, we want to diversify our investments.
Speaker: One of the factors that brought liquidity into the region was the Russia-Ukraine conflict.
Speaker: Emerging market indices had to rebalance when removing Russia out,
Speaker: They looked at other markets and there were challenges and risks in other markets which brought eyes onto the region.
Speaker: And that's created interest in liquidity because portfolio managers who weren't previously looking at the region are now looking at it a lot more seriously.
Speaker: And then there's various other activities.
Speaker: Obviously with Aramco's IPO that we saw a few years ago, that really brought eyes onto the region.
Speaker: You had the World Care, we had Expo 2020, and then with all the activities, with pandemic, the growth that we're seeing here in Dubai.
Speaker: So there are various different factors.
Speaker: I think there were very little opportunities in other parts of the world.
Speaker: We're now seeing asset managers, family offices, hedge funds moving to the DIFC.
Speaker: We have some of the leading global institutions already in the DIFC.
Speaker: Some of them are moving to ADGM.
Speaker: Saudi is attracting them.
Speaker: And this is where, when we bring them to DIFC, it's not for Dubai, it's for the region.
Speaker: So the last couple of years have been fantastic when you compare us to markets around the world.
Speaker: We hope the coming years are just as good.
Speaker: Thank you very much.
Speaker: So, we have seen in the past two years maybe headlines about an Abu Dhabi IPO fund.
Speaker: So, the fund aims to encourage private sector companies, SMEs, so on and so forth.
Speaker: Can you take us through the small headlines or clauses about this Abu Dhabi IPO fund and maybe what works around it as well, please, in terms of framing?
Speaker: Sure.
Speaker: The idea behind IPO fund is generally to support the companies that are coming out of Abu Dhabi.
Speaker: And in fact, not only Abu Dhabi, but the companies that are coming from the global scene, which are setting up bases in Abu Dhabi, either through a free zone structure or through a local landscape.
Speaker: The purpose of, to start with, the IPO fund is a $5 billion, $5 billion, their home fund.
Speaker: and the mandate is to go in as a public offering, participate as part of the public offering, up to 40% of the free float.
Speaker: Nonetheless, they have their own stringent criteria of which company they do want to participate.
Speaker: There is a whole application process.
Speaker: They do work in tandem with ADX to make sure that that company which they are bringing on the table
Speaker: does qualify ADX rules and regulation and does qualify SKR rules and regulation and they are ready and up for listing.
Speaker: However, it's not just the IPO fund that we work closely with.
Speaker: You know, Abu Dhabi, ADX in general, it does not work as a silo.
Speaker: We have the whole ecosystem that works.
Speaker: Along alongside ADX alongside IPO fund.
Speaker: So there is Abu Dhabi investment office, ADGM, the GREs of, uh, Abu Dhabi and, and the mandate is to bring companies to Abu Dhabi to, to put them on the, on, on the, on the landscape of Abu Dhabi and eventual goal with an eventual goal of listing them onto ADX.
Speaker: IPO fund is one of the supporting pillars to, to, to make that into an action.
Speaker: Thank you for joining us at HSBC Global Viewpoint.
Speaker: We hope you enjoyed the discussion.
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