The market for initial public offerings (IPO) in the Gulf looks set to reopen as stock markets and the oil price recover, and bankers expect a few companies to test the waters when Ramadan ends.

Investors look increasingly willing to support companies thirsting for cash after a protracted drought hit the market in the region -- though multi-billion dollar share sales are unlikely to happen anytime before next year.

Institutional investors are starting to again take more interest in the region as valuations ... relative to other emerging markets, look more enticing, said Michael Bevan, HSBC's head of equity capital markets in the Middle East and North Africa.

We saw strong interest in the market from institutions just prior to the summer break and anticipate renewed interest post-Ramadan, he said.

The Islamic holy month -- during which working hours are greatly reduced -- ends on September 19.

At $1.6 billion so far this year, IPOs in Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates (UAE) are at their lowest level since 2004, Thomson Reuters data show.

Vodafone Qatar VFQS.QA was the region's only IPO to raise close to $1 billion this year, in a deal arranged by HSBC and the Qatar National Bank.

The GCC (Gulf Cooperation Council) market has trailed other emerging markets. If oil prices remain firm, there's a catch-up to be done, said a London-based fund manager who asked not to be named.

While Kuwait, the UAE, Egypt and Qatar saw stock indexes rise between 3 percent and 6.6 percent in August, Saudi Arabia, Israel and Lebanon dropped between 1.9 percent and 3 percent over the same period.

Oil prices have helped, returning to the $70 per barrel level from $60 in mid-July.

Gulf governments and related issuers raised more than $10 billion on the international bond market in the second quarter, a sign that investors are returning after near zero issuance in the two previous quarters of the year.

On Tuesday, Saudi Arabia's Al Mouwasat Medical Services said the retail tranche of its $88 million IPO was 4.7 times oversubscribed and the institutional portion was 1.5 times, boding well for other IPO candidates.

Shares of Al Mouwasat will start trading on Wednesday.

Dubai-based Chris Laing, co-head of equity capital market for the region at Deutsche Bank, expects the IPO volume in the Gulf region could be up to $3 to $4 billion this year -- about one third the volumes seen in 2008 and 2007.

LONG QUEUE

A raft of companies have already announced their plans to increase capital and others are sounding out markets for listings. Last week, shareholders at Saudi Arabia's Sahara Petrochemicals Company 2260.SE approved the company's plan for a $280 million rights issue.

And on September 10, shareholders of Gulf Finance House GFHB.BH will vote on its planned $300 million rights issue and as much as $200 million worth of equity-linked Murabaha, a type of sukuk Islamic bond.

Global Investment House is also expected to raise about $500 million in a rights issue.

When you speak to the CEOs and CFOs in the region, their attitude to equity markets has changed, and some of them are now looking to access it, said Laing.

On October 4, Bahrain's Al Baraka Banking Group BARKA.BH will launch a $35 million IPO of its Syrian affiliate.

But it could test the waters for a $10 billion Islamic bank share sale initiated by Al Baraka's chairman Sheikh Saleh Kamel, planned by the second quarter of 2010.

Investors are saying that in principle, they are interested -- as long as economic fundamentals don't turn against them.

We are interested in IPOs. But if oil prices fall to $50 a barrel again, we are going to put our money somewhere else, the London-based fund manager said.

(Editing by Douwe Miedema)