Following the listing of national oil firm Saudi Aramco Saudi Arabia’s stock exchange expects an influx of foreign funds, despite concern among some analysts about whether the market can absorb the huge offer, according to the exchange’s Chief Executive, Khalid al-Hussan.
The Government announced that it intends to sell about five per cent of Aramco, hoping to raise some $100 billion or more in what is likely to be the world’s biggest initial public offer, with Aramco possibly listing on one or more foreign markets such as New York, London and Hong Kong.
Many private analysts think the $100 billion target is too ambitious, but even a $50 billion IPO could strain the Saudi market, which has a capitalisation of about $500 billion especially if the burden is not shared with a foreign exchange, Reuters said.
In January the securities regulator was asked to determine if the Aramco sale could destabilise the market.
Al-Hussan said that last month’s decision by equity index compiler FTSE Russell to upgrade Saudi Arabia to emerging market status, and a similar decision which fund managers expect MSCI to make in June, would attract billions of dollars of fresh foreign money to the local market, while regional investment bank EFG Hermes estimates Saudi Arabia could see fund inflows totalling $30 billion to $45 billion in the next two years if it reaches the foreign ownership levels of markets in neighbouring United Arab Emirates and Qatar.
Saudi Crown Prince Mohammed bin Salman told Reuters last month that the IPO could occur at the end of 2018 or in early 2019, depending on market conditions, although if Saudi officials are relying on foreign fund inflows to facilitate the Aramco IPO, they may be tempted to wait until early 2019.