* LSE sees opportunity in Middle East
* Money raised on LSE's equity markets fell in 2016
* Middle eastern privatisations may drive listings
* For a graphic on LSE listings: tmsnrt.rs/2nHf85o
By Dasha Afanasieva
LONDON, April 11 The London Stock Exchange
is targeting more listings from companies in the Middle
East, following a dearth of initial public offerings in the
aftermath of Britain's vote to leave the European Union.
Money raised on LSE's equity markets fell nearly 40 percent
in 2016 to 25.6 billion pounds ($32 billion). While funds raised
from initial public offerings (IPOs) so far this year recovered
slightly from 2016, they were much lower than in the previous
The exchange is now turning to the Middle East, an executive
said, seeking to convince investors it is attractive despite
uncertainty about how Brexit will affect London - a factor that
contributed to the recent collapse of LSE's proposed merger with
The biggest prize would be energy giant Saudi Aramco's
planned global listing, and LSE Group Chief
Executive Xavier Rolet joined British Prime Minister Theresa May
on a trip to Saudi Arabia last week, courting a slice of the
IPO, which could be the biggest in corporate history.
Ibukun Adebayo, who is in charge of emerging markets at the
London Stock Exchange, said other opportunities abound.
"Immediately, we see the bigger opportunity (for new
listings) emanating from the Middle East, and then the longer
term prospects are from the Indian subcontinent, and then
Africa," Adebayo told Reuters.
The LSE is promoting itself through events in the region,
helped by index compiler FTSE's office in Dubai. It is targeting
regulators and large companies, pointing to the large number of
natural resources companies listed in London.
LSE's Adebayo said he expected natural resources to continue
to be a key sector for IPOs. But with fierce competition from
exchanges globally and in the Middle East, as well as technical
and regulatory hurdles, new business may be hard to secure.
The London exchange also has a chequered history with
companies from resource-rich regions.
Prior to 2008 it courted Russian companies, landing
depositary receipt listings of Sistema, Megafon
and Gazprom. However three of those have
delisted in the past six months, and it has faced questions over
whether its entry requirements for them were too lax.
The capital markets division, which includes IPOs,
represents just over a fifth of the group's income.
Getting an unlisted group onto the exchange, however, can
drive revenue in bigger segments such as clearing and technology
services. As a result, IPOs are a key battleground for
"IPOs are a multiplier for derivatives, indices and clearing
businesses: liquidity attracts liquidity," said Martin
Steinbach, head of IPO and listing services at business services
A huge coup for London would be the listing of Saudi Aramco,
which is expected to raise $100 billion out of an estimated $300
billion in Saudi privatisation opportunities by 2022.
New York, Hong Kong, Singapore, Tokyo and Toronto are also
seeking to win a slice of the Aramco IPO and Saudi officials
have been meeting with exchanges to decide where the shares
should be traded.
In the wake of the massive correction in oil prices,
governments across the Middle East are looking to privatise
their businesses to shore up state budgets.
Adebayo says teaming up with local exchanges is key to the
"We consider London liquidity as complimentary," he said,
adding that the group is working on fully fungible dual
The LSE boasts more than 40 companies from the Middle East
and North Africa on the exchange but globally the proportion of
cross-border listings is declining. Bankers say with
technological advancement international investors can just as
easily access stocks listed in local exchanges as in hubs such
One of the biggest European IPOs in the first quarter, toy
seller Detsky Mir, managed to secure top international
asset managers to take up shares, despite being listed in
Governments in the Middle East are intent on developing
their domestic equity markets and Saudi Aramco is expected to
list on the local Tadawul exchange - which opened itself up to
foreign investors in 2015 - as well as on one or more overseas
Emirates Global Aluminium (EGA), valued above $15 billion,
is expected to list on the Dubai or Abu Dhabi stock exchange
"Governments have a natural interest to keep their companies
at home," said EY's Steinbach, summing up what could be the
biggest obstacle facing London.
($1 = 0.8056 pounds)
(Reporting by Dasha Afanasieva; Editing by Susan Fenton)