This content is from: Local Insights

Saudi Arabia

The first board of directors of the Capital Markets Authority (CMA), and its first chairman, the recent deputy governor of the Saudi Arabian Monetary Agency, Jummaz Al Suhaimi, have been appointed by Royal Decree A/114, dated 1 July 2004.

The appointment of the CMA board of directors, the entry of new banks into the Kingdom, the promulgation of the Capital Markets Law and the expected implementing regulations, coupled with high oil prices and high liquidity in the Saudi market, have led to a number of initial public offerings (IPOs) and secondary offerings being announced in the market. Also, joint-stock companies are inspired to launch IPOs or secondary offerings partly due to the astounding success of the IPO launched by Sahara Petrochemical Company in early June 2004. At the conclusion of the 10-day subscription period, Sahara Petrochemical was more than 125 times oversubscribed.

While some joint stock companies are eagerly awaiting the implementing regulations of the Capital Markets Law, other joint stock companies have decided to launch an IPO under the current regulatory structure, given the extensive liquidity chasing the small number of investment opportunities. A number of offerings are expected to go to market before the end of 2004. These include IPOs for a 20% stake in the Etisalat-led consortium awarded the Kingdom's second GSM licence, and for 50% to 70% of the shares in national insurance company NCCI. Al-Marai, a leading dairy and juice company, has reportedly received permission to simultaneously convert from a limited liability company to a joint-stock company when it launches its IPO later this year.

Al Belad Bank, a new bank being formed by the leading money exchange houses, will probably offer 50% of its shares before the end of the year. Also, the Saudi Arabian Mining Company (Ma'aden), Marafiq (a power and utilities company for Jubail and Yanbu), and National Commercial Bank (NCB) are all preparing to launch their own IPOs. The IPOs planned for NCCI, Ma'aden, Marafiq and NCB are of a particular interest because it is government or quasi-government shareholders, such as the Public Investment Fund (PIF), that are selling their shares to the Saudi public. It is widely believed that the PIF will be selling its shares in a number of other joint-stock companies over the next 12 months.

A number of large family businesses are also in the process of restructuring their holdings into joint-stock companies to prepare their companies for future IPOs.

A number of Gulf Cooperation Council country (GCC) and non-GCC foreign banks have received approvals to open branch offices in Saudi Arabia. Some of the new entrants will focus on the large retail market in Saudi Arabia, but others have expressed their intent to focus exclusively on investment banking. In the last two years, the following foreign banks have received approval of the Council of Ministers and Ministry of Finance to open branch offices in Saudi Arabia: Bank Muscat, BNP Paribas, Deutsche Bank, Emirates Bank International, HSBC, JP Morgan Chase, National Bank of Bahrain and National Bank of Kuwait.

Stephen P Matthews and Nabil A Issa

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