Monday, July 25, 2005

Calming the market (MEED, Zawya, Gulf News)

Middle East Economic Digest (MEED) reported that GCC markets and in particular UAE & Saudi will suffer from downward pressure due to the large number of upcoming IPOs that will sap the current high liquidity & valuation of these market. In addition, MEED reported current criticism of regulation (especially in UAE) where IPO's are only allowed to issue shares at par and to list a minimum of 55%. This prohibit established companies from listing. MEED quote one Investment Banker that urges the Government to regulate the market but not to interfere in pricing of new issues. Pricing should be arrived by book building exercise. Whilst the CMA, financial regulator of Saudi Arabia, is less interfering in regard to pricing and banks have ability to arrive at price through book building, the regulation remains opaque and convoluted as judged by recent IPO of Maarai.

Zawya & Gulf News - re-enforce same view as MEED. Fund Managers see downward pressure on the markets in the coming months as Dh 40 billion of new issues as well as rights issues coming to market, choking liquidity.

Finally, AMEinfo reports that DFM (Dubai Financial Market) are down by 32% and shares on the ADSM (Abu Dhabi Financial Market) by 24% from their peak.

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