Saudi Arabia is likely to see a big jump in the number and value of initial share sales in 2014, the head of Banque Saudi Fransi's investment banking unit said, as firms become keener to list and the regulator facilitates stock listings.
The kingdom's stock market, by far the largest in the Gulf Arab region, saw five initial public offers of shares in 2013 worth around $506 million, down in both volume and value from the previous year despite a 25.5 percent rise by the Saudi benchmark stock index.
But this year may be much more active, partly because of the finance ministry's plan for an IPO by Saudi Arabia's largest lender, National Commercial Bank.
"2014 is going to be a big year for equity capital markets," Yasir al-Rumayyan, chief executive of Saudi Fransi Capital (SFC), said in an interview on the sidelines of a finance conference in Bahrain's capitalManama.
"It's three things: it's the regulator and their requirements; it's the issuers and their willingness to come; and it's the ability of the adviser to execute.
"And I think this year, the regulator is very excited to get more companies in, issuers are coming in and financial advisers want to close deals in every quarter and not just once a year."
Rumayyan, who has been CEO of SFC since the start of 2011, said the volume and value of deals this year should exceed 2012, when seven IPOs raised the equivalent of around $1.4 billion.
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SFC hopes to secure regulatory approval in the next two months for an IPO of another company likely to raise around 800 million riyals ($213 million), he said without naming the company or giving other details.
The attitude of the Saudi regulator, the Capital Market Authority, has traditionally been conservative. But Rumayyan believes it is becoming more hands-off in some ways as the market develops; it is now focusing on ensuring disclosure requirements are met prior to listing, before letting the market decide the price of shares.
Last November the CMA said Astra Food, a Saudi Arabian producer and distributor of food products, had cancelled its plan for an IPO after deciding it could not confirm projections for its financial performance.
For years, Saudi Arabia has been preparing to open its market to direct foreign investment, but a date has not been set. Rumayyan said he believed the opening could happen "very soon", adding the caveat: "But I thought that three years ago."
Issuance in Saudi Arabia's local currency debt market will continue to grow, Rumayyan said, to help fund infrastructure projects, as banks sell more paper to meet Basel III regulatory requirements, and as more private companies print deals.
Sukuk issuance in the Saudi local currency market has been expanding as companies look to diversify their funding away from traditional bank loans, aided by considerable investor demand for paper.
Meanwhile banks including Fransi, Riyad Bank and Saudi British Bank have been issuing capital-boosting sukuk to replenish reserves.
Even though more issuers are pricing sukuk, competition for advisory roles on deals has driven the fees which banks earn to extremely low levels, Rumayyan said.
"The fees in DCM in Saudi are not the best, if you want to compare it to the region or internationally. But if that's what it is, then that's what it is," he said.
"If you want to win mandates in this market, you have to play with the same rules of the market. So sometimes it's about the relationship and sometimes it's to stay in the market.
"It's a good thing that we do some other stuff, not just debt capital markets."