The journey of Saudi Aramco By Dar Wong

THE largest state enterprise of Saudi Arab, Saudi Aramco, has been searching for a market exchange to do its IPO listing for more than a year.

Decision came after crude prices toppled since 2014 and could not recover until the end of 2015.

Technically, Saudi Aramco is the largest oil producer in the world with the largest oil reserve about 260 billion barrels.

Many analysts have estimated Aramco to be worth around US$2 trillion or higher.

Saudi authorities plan to list up to five per cent of the world’s largest oil producer on the Saudi Stock Exchange in Riyadh, the Tadawul, and other international markets, potentially raising as much as US$100 billion from public investors.

According to sources, the alternative listing is favoured towards Asia market.

Tokyo Stock Exchange has tried to woo Saudi Aramco.

However, its liquidity is lower than Hong Kong’s market.

It has also been proven that foreign listings in Tokyo attract lesser investors.

In fact, most foreign listings have delisted on Tokyo’s stock exchange.

On the other hand, Singapore’s exchange also tried to vie for the listing from Saudi Aramco but could not match the high liquidity of regional market in Hong Kong and Australia.

Hong Kong’s stock exchange is definitely on the qualifying list for Saudi Aramco to span its exposure in Asia while at the same time, move into China’s market.

Reputed as the No.1 IPO market in 2015 and 2016, Hong Kong stands a chance to net the business potential for this largest IPO in world.

Unfortunately, Saudi is not currently an accepted jurisdiction of incorporation for Hong Kong’s listed entities.

Even a secondary listing could be tricky because Hong Kong’s exchange currently does not recognise Saudi’s Tadawul as a legitimate primary listing venue.

Last week, Malaysia Prime Minister Datuk Seri Najib Tun Razak announced Saudi Aramco will invest US$7 billion into a project based in Pengerang, Johor.

The project, Refinery and Petrochemical Integrated Development (RAPID), is worth a total of US$27 billion and is sponsored by Petronas.

The ringgit has also started to stabilise from its previous fall and it hovered around 4.42 to 4.46 region against the dollar.

If this venture goes through, positively, it could drive up the demand for Malaysia’s currency.

We could also see a decline in US dollar to ringgit rate at 4.30 in due time. If the rate could fall further beneath the aforementioned support, KLCI market will stand a chance to climb higher to 1,750 level, in line with regional sentiments.

Nevertheless, investors will remain cautious on fence until mid-March since the US Fed could potentially tighten the credit and drive an impact into stock market.

Stay well prepared for your next profit-taking after mid-March.

DAR Wong is a registered Fund Manager with 28 years of experiences in Singapore. The expressions are solely at his own. He can be reached at dar@ pwforex.com