Saudi market likely to witness more M&As in 2023: SNB Capital MD

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The Saudi market is expected to witness more mergers and acquisitions (M&As) in different sectors this year, with the support of the Public Investment Fund (PIF) to diversify its investments in the Kingdom, Zaid Ghoul, Managing Director and Head of Investment Banking at SNB Capital, told Argaam.

On the sidelines of the Saudi Stock Market Forum 2023, Ghoul added that the market will see more public offerings, rights issues and dual listings.

SNB Capital established a team specialized in M&As in September 2022, under the Investment Banking Department. The team will work on closing a large number of M&As.

Ghoul further said a myriad of initial public offerings (IPOs) was carried out in 2022, due to the ease of procedures after obtaining the Capital Market Authority's (CMA) approval. Meanwhile, M&As take longer time period and may be called off at any stage. In addition, a dispute may eventually arise.

As many as 17 companies were also listed in the main market last year, with a combined offering size of SAR 37 billion. This is compared to nine listings with an aggregate value of SAR 17 billion a year earlier, an increase of nearly SAR 20 billion.

Meanwhile, Nomu-Parallel Market witnessed a higher volume and value of IPOs. As many as 19 firms were listed in 2022, with a combined offering size of SAR 3 billion, compared with three listings worth nearly SAR 240 million in 2021.

SNB Capital acquired a strong market share in the management of public offerings, dominating around 58% of the IPOs value, or over SAR 20 billion, the executive said. He expected this percentage to increase this year.

The low liquidity in the stock market is mainly due to the interest-rate hikes since June 2022, which enhances investment opportunities in other debt instruments such as sukuk, as they offer a strong return based on the risk rate. Thus, some banks issued sukuk with a return of around 6%.

The decline in liquidity indicates that investors turned to different investment asset classes such as deposits and fixed-income investment products. This is along with the real estate market, which investors in the region consider as an essential investment asset and a hedge against inflation.

Ghoul stressed that the long-term investments are better than those carried out in the short-term in terms of returns, and investors should consider the growth opportunities for each company.

The region and the Saudi stock market became clear to foreign investors due to the increased subscriptions and foreign investor's interest in diversifying their investment portfolios in several markets. Ghoul also indicated that he considers emerging markets as an opportunity to achieve high returns with an acceptable risk.

The CMA and Saudi Exchange (Tadawul) provided full support and laid the foundations required for enabling dual listings after floating the shares of Americana Restaurants International PLC Co. on the Saudi market and Abu Dhabi Securities Exchange (ADX). This will, in turn, pave the way for many companies to offer their shares on the Saudi and regional markets.

Saudi Arabia is among the 20 largest economies in the world as its GDP grew by approximately 8.7% in 2022. In addition, the commitment of government and PIF to the continuity of investment in the Kingdom helped lure more foreign investors. The legislations were also significantly updated over the past three years.

This created an attractive investment environment for global investments, both in the stock and bond markets, Ghoul said. He concluded that foreign investors have strong appetite to invest in government bonds that have a low-risk level.