In the years leading up to 2020, if you asked most financial market participants about the UAE and Saudi Arabia, interest would primarily lie in raising funds from their sovereign wealth funds to invest in developed markets. Even with oil surplus money being invested in world class infrastructure, inbound capital flows remained elusive outside of traditional sectors such as real estate and oil & gas.
In 2024 the UAE and Saudi are now experiencing the biggest economic transformation in the history of their young nations. Foreign investors have flocked to the region, with many family offices and hedge funds relocating to the UAE and regional head offices being set-up in Riyadh for multinational companies.
One of the key, albeit unheralded drivers of this activity has been capital market reform in both markets. In the UAE, recent regulatory changes served to lay the groundwork more flexible listing and IPO structure. As a firm example of this flexibility, the recent first of its kind dual listing in both KSA and the UAE of Americana shows full well the increasing depth, sophistication, and maturity of both markets.
Going further, direct listings have allowed issuers such as Alpha Dhabi Holding or Pure Health a more flexible and less rigorous path to list their shares on the ADX, which has led to an increased interest in Abu Dhabi-based companies from foreign investors. Specifically, Pure Health total gross demand for the listing surpassed over AED 265 billion and was oversubscribed 54 times for the institutional tranche and 483 times for the retail tranche.
In addition, the Securities and Commodities Authority (SCA) and the Registration Authority (RA) of Abu Dhabi Global Markets (ADGM) have enabled ADGM-based companies to list onshore. This has allowed for USD linked offerings and a wave of ADGM-based companies, such as Fertiglobe, ADNOC Gas or ADNOC LNS, going public with governance managed under English law.
Khalil C. Massoud
Chief Investment Officer
What’s unique about the UAE is that these listings are not initiated by unicorns, SMEs or multinational businesses but mainly state-owned and family businesses which underpins the UAE’s vision to allow foreign investor access to its economy and increase foreign investment.
The greater accessibility of foreign investment also signals a shift towards a more market-driven economy. And from the outside looking in, the heightened activity in Abu Dhabi or Dubai, stands in stark contrast to a slowdown in traditional developed markets. A combination of factors, including the Ukraine conflict, sustained high inflation, geopolitics, and surging interest rates made it a challenging for capital market transactions globally in recent years.
These factors have led to the international investor community to increasingly view the UAE as a market and a country to establish, grow and list their businesses. Going forward, with its economic resilience and progressive policymaking, the UAE is poised to continue its rise as a beacon for capital market transactions. Several novel structures have already emerged such as Special Purpose Acquisition Companies (SPACs) or accelerated book building (“ABB”), which are expected to increase the liquidity pool and demand for UAE equities.