Economy
Drop in Domestic Listings Shrinks Capital Raising in H1 2019
A latest Cross-Border IPO Index by Baker McKenzie for the first half of 2019 has revealed that capital raised by African issuers declined by 28 percent year on year to $341 million compared with $472 million in the same period on 2018.
The report, which reached this conclusion based on data sourced from Refinitiv, attributed the decline to the 80 percent drop in domestic capital raising in Africa, standing at only $85 million from four IPOs, compared with $419 million from the same number of IPOs in H1 2018.
According to the Index, the largest IPO to come out of the region so far in 2019 is Carbon Holdings Ltd, which is expected to raise as much as $250 million in London and Egypt sometime in June.
Egypt is generating buzz around its pipeline of IPOs with some speculating this could be the busiest year for listings in Cairo since the uprising in 2011.
Growing confidence in economic policies introduced since the currency float has boosted the EGX and is prompting companies to consider share sales. One large pipeline IPO is expected from Banque du Caire SAE in Q3 2019.
In a statement obtained by Business Post, the Head of Capital Markets at Baker McKenzie in Johannesburg, Mr Wildu du Plessis, stated that, “The drop in African IPO values in H12019 was mostly because of political and economic uncertainty on the continent.
“Investors wanting to raise capital in Africa are thinking twice and waiting for political and economic stability to return before going ahead.
“Also eroding investor confidence in Africa are the escalating global trade tensions, which have culminated in, for example, the so-called United States (US) China trade wars and the possibility of a “no deal Brexit” – both have the potential to impact African economies significantly.”
“In South Africa, capital raising has decreased substantially in recent years, also due to economic and political uncertainty. Political stability will hopefully begin to return now that country’s elections are over, but there is still a lot of work to do to stabilise the economy.
“The World Bank recently downgraded South Africa’s growth rates and I think there is at least another year of hard work before the economy starts to recuperate and capital markets in South Africa recover,” Mr Du Plessis added.
“However, there is good news in other jurisdictions in Africa. In addition to the healthy pipeline of IPOs in Egypt, there are also signs of life returning to Nigeria’s capital markets.
“Political instability was also to blame for a big collapse in capital raising in Nigeria in recent years, but the country looks to be recovering and, according to Baker McKenzie’s recent Global Transactions Forecast, there is a predicted return of IPOs in Nigeria in the next three years.
“A case in point, Airtel Africa announced recently that it is seeking to raise as much as $750 million in London and Nigeria, but the company has yet to release more information about when it plans to go public this year.
“Hopefully this is the start of a long upswing in capital raising activity in the country,” says Mr Du Plessis.
The top cross-border IPOs by African issuers were South African company Renergen Limited’s listing in Australia, which raised $7 million; and Egyptian company Carbon Holding’s pipeline dual listing in London and Egypt, which is expected to raise $250 million.
Both of these cross-border IPOs are in the energy and power sector. In terms of domestic IPOs, technology company BMIT Technologies PLC raised $55 million when it listed in Malta, real estate company ICON Properties PLC’s listing in Malawi raised $20 million, industrial company Skyway Aviation Handling Co raised $6 million when it listed in Nigeria and healthcare company Speed Medical SAE raised $3 million in a domestic IPO in Egypt.
A major deal that is excluded from African figures is Jumia Technologies’ debut on the NYSE, which raised $225 million in April. Jumia is a pan-African e-commerce start-up but its parent company, Jumia Group, is incorporated in Germany, so it is not included in the Africa report.
On the global scene, Baker McKenzie said capital raising in global IPO markets fell by 37 percent, with volume dipping 34 percent in the first half of the year compared to the same period in 2018.
A total of $69.8 billion was raised across 514 IPOs, which is the lowest for value and volume since 2016. The US Federal government shutdown, continuing trade tensions between the US and Beijing, the ongoing Brexit saga and the decline of mega IPOs all contributed to a slower market performance.
With fewer IPOs in the market, competition amongst exchanges is growing, as some listing locations make strategic changes to entice public offerings. The introduction of China’s Science and Technology Innovation Board looks set to shake up the market and challenge New York and Hong Kong for tech listings.
Baker McKenzie’s Head of Global Capital Markets, Koen Vanhaerents, said, “The global IPO market experienced quite a slow start to the year as significant political issues stifled activity, along with a change in investor sentiment towards risk – particularly among pre-revenue companies. While global activity experienced sharp declines, this is perhaps skewed slightly when compared to the stellar performance seen in the same period in 2018.
“With a strong pipeline, H2 2019 looks set to deliver a much more prosperous performance overall.”
EMEA outlook
The EMEA IPO market struggled during the first six months of 2019 due to uncertainties surrounding the UK’s exit from the European Union. Overall capital raised fell by 67 percent compared to the same period in 2018 to $9.2 billion while the number of IPOs fell by 61 percent to 47.
Cross-border activity was even more profoundly impacted with only three listings in EMEA and only one of those on the London Stock Exchange. Domestic activity levels helped the London Stock Exchange to retain the top spot for overall capital raising at $2.7 billion from 12 listings. Seven of these listings were from the financial sector and raised almost $2 billion, the largest of which was Network International’s $1.4 billion IPO.
Second to London was Borsa Italiana with $2.3 billion from seven listings, boosted by the $2.2 billion Nexi SpA listing. SIX Swiss exchange pulled in $1.9 billion from two IPOs, with Stadler Rail’s debut accounting for $1.3 billion of that.
The statement said despite its sluggish performance, EMEA is proving to be the region of choice for FinTech listings, particularly in the payments field, as the age of digitization and cashless transactions continues to explode, fuelling the need for innovation and technological growth. FinTech listings accounted for more than a third of capital raised and the largest listing was Nexi SpA’s IPO.
According to the Head of EMEA Capital Markets at Baker McKenzie’s, Mr Adam Farlow, “Europe’s market and economy continues to struggle under the weight of political volatility and a lack of clarity around Brexit, but all eyes look to October for more transparency and direction.
“We are hopeful that the market will subsequently settle and activity in London will recover. The demand is still there for access to the liquidity and exposure that comes with the London Stock Exchange.”
By Dipo Olowookere
Investors at the Nigerian Exchange (NGX) Limited have continued to show excitement for the full-year earnings of companies on the exchange so far.
On Friday, Customs Street further appreciated by 1.01 per cent as more organization released their financial statements for the 2025 fiscal year.
During the session, traders continued their selective trading strategy, with the energy sector going up by 2.47 per cent at the close of business despite profit-taking in the banking counter, which saw its index down by 0.11 per cent.
Yesterday, the insurance space grew by 2.16 per cent, the industrial goods segment expanded by 1.70 per cent, and the consumer goods industry jumped by 0.42 per cent.
Consequently, the All-Share Index (ASI) increased by 1,722.13 points to 171,727.49 points from 170,005.36 points, and the market capitalisation soared by N1.106 trillion to N110.235 trillion from the N109.129 trillion it ended on Thursday.
Business Post reports that there were 59 appreciating stocks and 19 depreciating stocks on Friday, representing a positive market breadth index and strong investor sentiment.
The trio of Omatek, Deap Capital, and NAHCO gained 10.00 per cent each to sell for N2.64, N6.82, and N136.40 apiece, as Zichis and Austin Laz appreciated by 9.98 per cent each to close at N6.72 and N5.40, respectively.
Conversely, The Initiates depreciated by 9.74 per cent to N19.45, DAAR Communications slumped by 7.32 per cent to N1.90, United Capital crashed by 6.55 per cent to N18.55, Coronation Insurance lost 5.71 per cent to quote at N3.30, and First Holdco shrank by 5.53 per cent to N47.00.
The activity chart showed an improvement in the activity level, with the trading volume, value, and number of deals up by 33.77 per cent, 93.27 per cent, and 10.63 per cent, respectively.
This was because traders transacted 953.8 million shares worth N43.1 billion in 51,005 deals compared with the 713.0 million shares valued at N22.3 billion traded in 46,104 deals a day earlier.
Fidelity Bank was the most active with 92.4 million units sold for N1.8 billion, Chams transacted 69.2 million units valued at N310.9 million, Deap Capital exchanged 59.1 million units worth N382.7 million, Access Holdings traded 57.2 million units valued at N1.3 billion, and Tantalizers transacted 48.6 million units worth N228.2 million.
By Adedapo Adesanya
The value of the Naira contracted against the United States Dollar on Friday by 13 Kobo or 0.01 per cent to N1,366.19/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) from the previous day’s value of N1,366.06/$1.
According to data from the Central Bank of Nigeria (CBN), the Nigerian currency also depreciated against the Pound Sterling in the same market window yesterday by N2.37 to N1,857.75/£1 from the N1,855.38/£1 it was traded on Thursday, and further depleted against the Euro by 57 Kobo to close at N1,612.52/€1 versus the preceding session’s N1,611.95/€1.
In the same vein, the exchange rate for international transactions on the GTBank Naira card showed that the Naira lost N8 on the greenback yesterday to N1,383/$1 from the previous day’s N1,375/$1 and at the black market, the Nigerian currency maintained stability against the Dollar at N1,450/$1.
FX analysts anticipate this trend to persist, primarily influenced by increasing external reserves, renewed inflows of foreign portfolio investments, and a reduction in speculative demand.
In the short term, stability in the FX market is expected to continue, supported by policy interventions and improving market confidence.
Nigeria’s foreign reserves experienced an upward trajectory, increasing by $632.38 million within the week to $46.91 billion from $46.27 billion in the previous week.
The Dollar appreciation this week appears to be largely technical, serving as a correction to the substantial losses experienced from mid- to late January.
Meanwhile, the cryptocurrency market slightly appreciated, with Bitcoin (BTC) climbing near $68,000, up nearly 5 per cent since hitting $60,000 late on Thursday after investor confidence in crypto’s utility as a store of value, inflation hedge, and digital currency faltered.
The sell-off extended beyond crypto, with silver plunging 15 per cent and gold sliding more than 2 per cent. US stocks also fell.
The latest recoup saw the price of BTC up by 4.7 per cent to $67,978.96, as Ethereum (ETH) appreciated by 6.3 per cent to $2,021.10, and Ripple (XRP) surged by 9.5 per cent to $1.42.
In addition, Solana (SOL) grew by 7.3 per cent to $85.22, Cardano (ADA) added 6.1 per cent to trade at $0.2683, Dogecoin (DOGE) expanded by 5.4 per cent to $0.0958, Litecoin (LTC) rose by 5.2 per cent to $53.50, and Binance Coin (BNB) jumped by 2.3 per cent to $637.79, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
By Adedapo Adesanya
Oil prices settled higher on Friday as traders worried that this week’s talks between the US and Iran had failed to reduce the risk of a military conflict between the two countries.
Brent crude futures traded at $68.05 a barrel after going up by 50 cents or 0.74 per cent, and the US West Texas Intermediate (WTI) crude futures finished at $63.55 a barrel due to the addition of 26 cents or 0.41 per cent.
Iran and the US held negotiations in Muscat, the capital of Oman, on Friday to overcome sharp differences over Iran’s nuclear programme.
It was reported that the talks had ended with Iran’s foreign minister saying negotiators will return to their capitals for consultations and the talks will continue.
Regardless, the meeting kept investors anxious about geopolitical risk, as Iran wanted to stick to nuclear issues while the US wanted to discuss Iran’s ballistic missiles and support for armed groups in the region.
Any escalation of tension between the two nations could disrupt oil flows, since about a fifth of the world’s total consumption passes through the Strait of Hormuz between Oman and Iran.
Saudi Arabia, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, as does Iran, which is a member of the Organisation of the Petroleum Exporting Countries (OPEC).
According to Reuters, Iran objected to the presence of any US Central Command (CENTCOM) or other regional military officials, saying that would jeopardise the process.
The current confrontation was sparked by more than two weeks of unrest in Iran that saw authorities launch a deadly crackdown that killed thousands of civilians and shocked the world. As reports of the deaths trickled out of Iran, US President Donald Trump threatened to strike Iran if any of the tens of thousands of protesters arrested were executed.
Meanwhile, Kazakhstan’s planned oil exports could fall by as much as 35 per cent this month via its main route through Russia, as the country’s top oil company, Tengiz oilfield, slowly recovers from fires at power facilities in January.
ING analysts have pointed out Iran’s neighbour, Iraq, and a disagreement with the US as another bullish factor for oil prices. It seems Iraqi politicians favour Mr Nouri al-Maliki as the country’s next Prime Minister, but the US thinks Mr al-Maliki is too close to Iran. President Trump has already threatened the oil producer with consequences if he emerges as PM.
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