A Year of Promise

With a focus on the region’s IPO activity, Miguel Azevedo Citi, Managing Director, Head of Investment Banking, Middle East and Africa (ex-South Africa), provides a robustly positively look at the past year, highlighting strong examples of an active and growing market

How has your business benefitted from the economic stability our region has experienced compared to the wider world?

It is very clear that this region is performing differently from the rest of the world; but it is not about stability but rather about growth and growth prospects here versus recessionary expectations elsewhere. The GCC is clearly benefiting from a sustained strong oil price, but many other very important things are happening and are moulding the expectations and the future reality of the region: (1) Strong vision from the leadership with clear plans for the next decades. (2) Clear use of the proceeds resulting from this accumulation of liquidity namely in developing a new economic model based on non-oil sustainable industries (hydrogen, renewable energy, tech enabled manufacturing, agritech etc.) as well as high valueadded services (retail offerings, differentiated hospitality, new tourism destinations, logistics and trade enabling tech). (3) Use of public listings as a way of increasing scrutiny, governance and ultimately the pursuit of higher productivity and excellence; all this under a politically stable background and a stronger voice in the global geopolitical map.

Miguel Azevedo, Citi, Managing Director, Head of Investment Banking, Middle East and Africa (ex-South Africa)

Did the headline geo-political events of this year greatly change your plans or affect your business experience?

This region has taken a relatively neutral stance on most geopolitical issues and is acting a little bit as a valve to alleviate global pressures; we have seen the leadership of this region taking very important steps towards dialogue and reconciliation and I think all that has benefited to make the region more central in the mind of the international community, including the financial community.

Have you noticed much development in the way clients and customers are interacting with their financial services providers this past year?

Not really. There have not been any noticeably significant events or trends beyond the ongoing increase in the uptake and development of digitisation in the wider banking sector across the region.

Which market sectors have you seen develop as leading trends this year?

Clearly the whole clean energy and energy transition space is extremely active and moving in the right direction; we have seen the utility space doing many IPOs which has benefited mainly UAE; I believe that in addition to further developments in the energy/chemical vertical we will start seeing further activity, namely M&A and capital markets activity, in sectors that are core to the region: logistics,

hospitality, entertainment, real estate, food and non-food retail; in all these sectors we have players in this region that are amongst the most exciting stories globally; I also believe that we will see technology, technology enabled and fintech champions emerging in the near future in this part of the world as it has been attracting a lot of talent from everywhere else.

What surprised you the most about the region’s banking and financial services market in past year?

I think the strength of the system is at record levels and I think banks are very liquid and well capitalized. On the investment banking side, we have seen an increasing sophistication in the local leading players, playing very important roles in everything that is happening, and of course, that is a very good signal.

Why was the GCC’s IPO performance so strong?

We need to look country by country. Saudi Arabia has a very granular and deep market; a very diverse supply with many companies coming to the market, from different sectors that are both state owned and truly family owned too. Demand is also very granular with lots of retail investors being active in the market Abu Dhabi has been leading primarily with offerings in the energy and chemical space. These companies are global leading players with global growth stories and those IPOs have been performing very well in an ecosystem that is very supportive.

Dubai is the new kid on the block. The Government launched an ambitious plan to bring companies to the market, so far with primarily utilities with great, solid stories and all very well executed. This is paving the way for family and private equity owned businesses later on. Hopefully, we will see true Dubai icons come to the market in the sectors that made Dubai a global metropolis such as entertainment, hospitality, fashion, retail and technology.

Did this year mark a new beginning for the IPO market? Is it here to stay and can it go even further?

I would dare to say yes because the fundamentals are there, and the political leadership is here as well. There is also no shortage of great entrepreneurial stories too. One point to mention is the need to keep global investors engaged. So far global investors have been allocated between 25-30% of the shares sold and, in many situations, only small amounts. Investors are willing to invest

more and put capital and resources at work in this region, but they need to create their own portfolios of Middle Eastern companies big enough to justify the effort.

The other point is the need for market stabilisation rules in order to manage the first days of trading post-IPO. The market is very recent and needs these tools to mature well.

Can you highlight some situations that you consider great examples of the recent success of the GCC stock market?

Here some of the transactions that we were honoured to lead.

I would highlight the DEWA IPO which completely transformed the Dubai stock market and open the gates for further IPOs. It was the largest

I THINK THE STRENGTH OF THE SYSTEM IS AT RECORD LEVELS AND I THINK BANKS ARE VERY LIQUID AND WELL CAPITALIZED

Did the region start to become a real alternative for companies outside the region to list?

It is still early days, but we can see a very serious commitment to attract great companies, not necessarily only the very big ones but certainly the very good businesses. The creation of the Abu Dhabi IPO fund is an excellent step and shows real commitment. At the very least we can say that as of now we believe the region is becoming a very serious alternative to the UK or the US when it comes to listing location, certainly the case for new companies from the GCC but also from the wider region (Egypt for example) and even beyond. We are confident this will happen.

transaction in the region after Aramco IPO and the second largest in EMEA this year after Porsche IPO. The IPO of Fertiglobe. The creation of Fertiglobe by merging the fertiliser assets in the region of ADNOC and OCI is a visionary transaction putting together private operators and government owned entities to create a global player. The IPO consolidated this new corporate champion and will allow it to extend its global presence. The IPO of the Saudi stock exchange Tadawul itself. This is the pinnacle of recognition of the merits of using the public markets; it gives the exchange a life of its own, and shows the commitment to the public equity markets. A remarkable case of putting your mouth where your money is. Finally let me highlight the recent capital raise we lead for EMPG, the local leader in property and car classifieds. It is a strong technology enabled company that we believe is a great example of the companies that will be IPO’ing in the next 12-24 months in these markets.