JPMorgan, Citi See No End to Fevered Demand for Middle East IPOs

(Bloomberg) -- Frenzied demand for initial public offerings in the Middle East shows no signs of slowing, providing a rare bright spot as investors shun listings from the U.S. to Europe.

Saudi digital security company Elm Co. drew $57 billion in institutional orders for its IPO this week, almost 70 times the targeted proceeds. It priced at the top of its range, as did Scientific & Medical Equipment House Co. for its Riyadh offering.

Investors in Europe and the U.S. have by contrast stayed on the sidelines during recent market turbulence. In New York, more than $4 billion of blank-check offerings have been called off this year, while lack of demand forced U.S. human resources platform Justworks Inc. and Dutch startup WeTransfer to scrap listings. German drugmaker Cheplapharm and Spanish bank Ibercaja delayed IPO plans.

It's not just local demand boosting share sales in the Middle East, according to Nicolas Skaff, head of emerging markets ECM at JPMorgan Chase & Co. in London. “The interest and the engagement that we're seeing from international investors is as high as it's ever been.”

Citigroup Inc. is doubling down on its bet that Middle East IPOs will keep coming at a record clip by beefing up its presence in the region. Saudi Arabia's largest pharmacy retail chain, Al Nahdi Medical Co., this week kicked off the largest share sale in the kingdom since Saudi Aramco went public in 2019.

And Dubai is seeking to close the gap with regional rivals Abu Dhabi and Riyadh with a clutch of planned listings, including that of its main utility, Dubai Electricity & Water Authority.

“The GCC as a whole is a bright spot for investors especially given recent IPOs have performed very well,” said Rudy Saadi, head of ECM in the Middle East and North Africa at Citigroup, noting the strong pipeline of deals in Saudi Arabia and the United Arab Emirates.

Still, IPOs in the Gulf may face tougher conditions ahead, as concerns over tightening monetary policy rattle global markets, making investors less receptive to new listings. High oil prices have recently supported local equity benchmarks, but growing competition between the UAE and Saudi Arabia is creating discord at the heart of OPEC.

And the Middle East is not devoid of geopolitical risks. Yemen's Houthi fighters have claimed several rare attacks on the UAE in recent weeks, an escalation of a conflict that is fueling tensions in the Gulf.