As US Capital Markets Fade, Saudi Arabia Has its Day in the Sun

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It’s an absolute gusher on the Arabian Peninsula.

Marafiq, the Saudi Arabian utility formally known as the ‘Power and Water Utility Company for Jubail and Yanbu,’ attracted nearly $900 million of investor demand on Sunday when investment banks began taking orders for its upcoming IPO. It’s just the latest instance of insatiable demand for Saudi exposure, a stark contrast to the US where capital markets are drier than the Rub’ Al-Khali.

The Oil Kings

Initial public offerings in the US raised $155 billion in proceeds in 2021, the best year on record. But thanks in large part to energy market inflation that spilled over to every facet of the economy, US IPOs have only managed to raise $4.8 billion through the first six months of 2022. The Saudi experience, naturally, has seen the inverse. Initial listings in the Middle East and Northern Africa rose 500% in the first six months of the year, while capital raised has jumped a whopping 2,952%.

The diverging fortunes have put the US-Saudi-relationship on ice. On Sunday US Treasury secretary Janet Yellen criticized the Saudi-led OPEC’s decision to cut oil production as “unhelpful and unwise.” The kingdom doesn’t appear to be any worse for the wear:

  • Marafiq, which provides water and power services in industrial cities across the kingdom, is expected to be the largest IPO in the kingdom since pharmacy chain Nahdi Medical raised $1.4 billion, according to Bloomberg.
  • Saudi Arabia’s Public Investment Fund, which also backs Marafiq, is set to list its $3 billion green bond on the London Stock Exchange with a 100-year tranche. Analysts note it’s rare to be able to issue such a long-dated bond on volatile market conditions, but cited the kingdom’s strong fiscal position. Of note, the modern kingdom of Saudi Arabia was founded in 1932, less than a century ago.

Zeina Rizk, executive director of fixed-income asset management at Dubai-based Arqaam Capital, told The Wall Street Journal: “The (Gulf Cooperation Council) has been the best place to hide and weather the storm since the beginning of the year.”