The MENA IPO Summit kicks off today. Here are some trends that point to the dynamic opportunities Dubai's capital markets have to offer in 2023.
January 23, 2023
The UAE's macroeconomic outlook for 2023 remains positive and represents a bright spot that is countercyclical to developed markets.
Driven by a strong rebound in tourism, construction and undoubtedly Dubai World Expo-related activities, 2022 proved to be a year of robust growth for UAE, building on which 2023 looks to be a promising year for the nation’s economy.
The consistent implementation of measures such as the reduction of non-performing loans in the banking sector and similar measures in other sectors, combined with the tightening of financial conditions to contain inflationary pressures, will continue to have a positive impact on economic growth.
Aside from the effectiveness of these steps and ongoing economic diversification efforts, another catalyst driving economic growth in the emirate, in 2023 and beyond, is the high level of openness of the Dubai economy, a destination hailed to be a great place to live and work and home away from home for individuals and businesses. A combination of these factors has led to a marked improvement in business confidence in recent months, with private consumption, investment and above-trend output in the tourism sector on the rise.
The upswing in the UAE capital markets reflect economic growth prospects.
Last year was a year of great significance for the UAE's capital markets. DFM alone saw six significant IPOs in 2022, including state-owned DEWA (currently the largest company on the exchange by market capitalization), followed by SALIK, Empower, TECOM, Union Coop and Taaleem. The enthusiastic response to these IPOs reflects the appetite of investors for companies with strong business models.
DFM's extensive investments in numerous innovative connectivity solutions and increased efforts to diversify its product offering by trading crude oil contracts and expanding its equity futures market have strengthened its position as one of the leading regional markets in terms of diversifying investment opportunities for market participants. As a result, the number of investors has tripled in 2022, of which nearly two-thirds are foreign investors. With more IPOs in the pipeline, it is expected that local volumes will improve and drive greater foreign investor participation in the country.
Another interesting trend is that currently more than three quarters of market capitalization is held by institutional investors, while the rest is held by retail investors. The fact that retail investors in the UAE account for 18-20% of market capitalization on average indicates that the UAE capital markets are evolving from an emerging market to a developed market.
In addition, DFM's Sustainability Strategic Plan 2025 has gained further momentum to support ongoing efforts to promote environmental, social and governance (ESG) best practices among stakeholders of listed companies, especially in light of COP28 which is to be held in the UAE later this year, and the start of the implementation of the ambitious Dubai Economic Agenda 'D33' in the Emirate.
The critical role of communications on the way to an IPO.
In the wake of all these positive trends, it has never been more important for issuers to communicate effectively with their stakeholders at every stage of the IPO process.
The MENA IPO Summit will attract the best minds from across the IPO value chain and serve as a platform to not only highlight the strong momentum and promising prospects of the IPO sector in Dubai, but also provide valuable lessons to those looking to start a life as a public company.
Read about our key takeaways from the Summit next week. Watch this space!