Middle East Equity House: HSBC
Bridging the gap The continued growth of issuance from the Middle East created challenges and opportunities. For combining its expertise and reach from outside the region with local knowledge, HSBC is IFR’s Middle East Equity House of the Year.
In a market that sees a contrast of national champions vying alongside often visiting international bankers, HSBC enjoys a unique position being global in scale but locally established, having been in some locations longer than the countries have been independent.
“We’re acting as the bridge for this region and the rest of the world,” said Samer Deghaili, co-head of investment banking for Middle East, North Africa and Turkey at HSBC. “We’re seen as a direct connection, a friendly face and reliable pair of hands.”
HSBC’s reach meant it was active across all thematics of Middle East ECM in the year, from the diversification of the UAE towards private sector IPOs with supermarket operators Spinneys and Lulu Group; the growth of secondary transactions with Saudi Aramco’s jumbo US$12.35bn follow-on; and the growth of peripheral markets with Oman’s largest IPO in the US$1.95bn listing of OQ Exploration and Production.
All HSBC’s roles in the year were at global coordinator level.
Top-line roles mean it was up to HSBC to solve for challenges such as completing OQEP’s IPO in a frontier market that trades US$10m of stock a day and the bank was able to leverage its experience on the Aramco IPO, and floats in the UAE over recent years. Transferring lessons from one country to another is vital as markets mature, in terms of deal type, issuers, sectors and regulation, and that is where HSBC’s reach from hubs in Saudi and the UAE – complemented by the team in London’s expertise from other markets – give it an advantage over rivals.
The year was not without challenges, with disappointing aftermarkets on the UAE’s private sector deals. While HSBC has not been immune to this, with a stretched valuation and late upsize on Lulu leading to weak trading, its other UAE listings have fared better with coverage records set for government-backed Parkin while Spinneys was a rare private sector deal in the Emirates to trade up.
Parkin and Spinneys saw the relatively novel use of stabilisation, in the latter case perhaps a factor in its differing performance to other private sector deals.
Private sector trades are sold on valuation multiples like P/E and EV/Ebitda, rather than dividend yields used for privatisations. Spinneys showed progress with pricing at 21 times 2024 P/E, which looked even more impressive when Delivery Hero’s Talabat priced its IPO only slightly higher and initially traded down.
“Many investors are here for the longer term and consistently keep investing. Some deals traded down but investors are still holding,” said Deghaili.
HSBC has been active across deal sizes, which was key in Saudi Arabia where dealflow is often more slanted to smaller private sector issuers.
As a result it has appeared as sole global coordinator on deals ranging from the US$271m Arabian Mills up to the largest Tadawul IPO of the year, the US$764m listing of Fakeeh Care Group.
“By deal count we’re consistently number one,” said Mohammed Fannouch, co-head of investment banking for Saudi Arabia. “We’re set up to not only originate but act on a small basis.”
A key focus for the bank has been bringing in new investors to help the markets mature, even though deals are consistently oversubscribed.
“We are bringing new investors into deals, especially from Asia and the US where people hold comparable companies but nothing in the GCC,” said head of CEEMENA ECM Chris Laing.
The bank has brought management teams to London and New York to meet investors in the effort to tap the widest pool of demand.
Those efforts were vital when leading the US$12.35bn-equivalent follow-on in Aramco, the largest ECM transaction globally since 2021.
Five years on from Aramco’s IPO, in which shares were placed locally due to a high valuation, the aim was to internationalise the investor base. HSBC was one of four banks that worked on the transaction for two years and ensured it went off without a hitch.
“We were the highest demand generator on Aramco,” said Fannouch. “There is recognition among the international community that HSBC is the bridge to this region.”
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