Gulf's oil cash going into stocks
Gulf, Economics, 11/23/2004

Gulf Arab investors are pouring liquidity from soaring oil prices into equities, with at least a dozen initial public offerings and rights issues ready to hit the region's market shortly, experts say.

The new issues are likely to mobilize some $3.1 billion this year compared to less than a billion in 2003, according to analysts.

It is estimated that by the end of 2005, some $9 billion will be raised through several initial public offerings (IPOs) in the six Gulf Cooperation Council (GCC) states of Saudi Arabia, Kuwait, Bahrain, Oman, Qatar and the United Arab Emirates (UAE).

"The high oil prices over the past three years have brought a lot of revenues into the region, and this high domestic liquidity is looking for investment opportunities that are coming in the form of equities," Ziad Dabbas, who heads the capital markets group of the National Bank of Abu Dhabi (NBAD), said.

"Share-dealing has made big leaps across the Gulf states due to high profits of the trading firms as a result of an upswing in the economy, strong oil prices and high public and private spending," he said.

Some share yields have exceeded 4%, while interest rates on deposits do not exceed 1.5%. And the recent IPOs have all been heavily over-subscribed.

In the UAE alone, the IPOs of Amlak Finance, Finance House and Arabian Technical Construction were oversubscribed 33, 78 and 64 times, respectively.

In Saudi Arabia, the Sahara Petrochemical Company's IPO was over-subscribed 22 times. Etihad Etisalat Consortium, the second mobile phone operator in the kingdom, raised $267 million after recently floating 20% of its stock.

"The stampede by investors for shares is also to take advantage of record corporate performance and the psychological fears of investing abroad," Saudi economist Ihsan Bu Hulaiga said.

"The primary market activity has been spurred by the secondary market performances in the past three to four years. Most listed companies have posted impressive profits with healthy returns.

"However, post-September 11 fears still persist and Gulf investors now prefer to invest at home rather than in the US," Bu Hulaiga added.

Previous Stories:
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