DIFC Publishes Report On Regional Outlook For Banking And Capital Markets

Dubai International Financial Centre (DIFC), a leading financial hub in the MEASA region, has released a report titled "Regional Outlook for Banking and Capital Markets" in collaboration with LSEG Data & Analytics. The report outlines the anticipated growth of regional IPOs in three phases: privatisation of state-related entities, listings by family-owned companies, and FinTech and tech-enabled start-ups.

The report also highlights the profile of investors in the region, particularly in Dubai, which has seen an influx of wealthy individuals and families looking to capitalise on investment opportunities. Arif Amiri, CEO of DIFC Authority, commented on the findings, noting that the surge in IPOs has significantly expanded capital markets across the MENA region. This growth is attributed to reforms aimed at improving market infrastructure and attracting foreign and regional investments.

Amiri emphasised DIFC's role in driving innovation and growth within the financial sector through its strategic initiatives and robust regulatory framework. He stated that Dubai’s IPO boom underscores the city’s status as a thriving hub for capital markets, with DIFC playing a crucial role in enabling this acceleration through firms that drive capital markets and provide advisory services for IPOs.

Following two years of moderate IPO activity, 2024 shows signs of a rebound, supported by the postponement of several 2023 deals in anticipation of more favourable market conditions. According to EY data, 51 IPOs took place in 2022, raising US$22 billion from both family businesses and public sector entities.

The privatisation of state-related entities is leading to greater economic diversification, private sector development, and sovereign liquidity creation. As of March 2024, Dubai had completed six out of ten planned government entity IPOs. Notably, Parkin was 165 times covered and attracted US$71 billion in orders, setting a new record for the emirate.

In November 2023, Dubai Taxi Co., a unit of Dubai’s Roads and Transport Authority (RTA), raised US$315 million through its IPO, which was 130 times oversubscribed. Saudi Arabia’s plans to privatise US$55 billion in assets by 2025 further highlight the regional trend towards privatisation.

Listings by family-owned companies are driving business growth, succession planning, and enhanced governance. For instance, Al Ansari Financial Services raised US$210 million from its 2023 IPO. Spinney’s listed its shares on DFM in April 2024 after incorporating in DIFC to benefit from its extensive laws and regulations.

The momentum from other anticipated listings, such as Lulu’s forthcoming IPO, is creating incentives for more family businesses to go public. A third wave of IPOs is expected from FinTech and tech-enabled start-ups, stimulating new industries with high-growth potential.

Impact on Financial Ecosystem

The increased IPO activity has significantly benefited banks, investment banks, brokerage firms, and law firms within DIFC’s ecosystem. Fees for MENA deals exceeded US$1.2 billion in 2023, while proceeds from MENA equity and equity-related deals surpassed US$13 billion.

The report also notes that Dubai’s capital markets are maturing due to DIFC’s robust regulatory framework and commitment to innovation. DIFC hosts over 230 investment banks that are actively stimulating capital markets.

Investor Landscape

DIFC's business-friendly approach towards the rule of law has made it an attractive jurisdiction for incorporation. John Wilkinson of Goldman Sachs highlighted DIFC's role in driving growth as a venue for global investors.

The UAE has attracted a record number of High-Net-Worth Individuals (HNWIs) in recent years. As of now, there are approximately 109,900 resident HNWIs in the UAE, including 298 centi-millionaires and 20 billionaires. This influx has prompted DIFC’s estimated 370 asset managers to strengthen their presence in Dubai.

With inputs from WAM