January 24, 2018 / 10:32 AM / 4 months ago

Saudi regulator asked to study local market impact of Aramco IPO

KHOBAR, Saudi Arabia/RIYADH, Jan 24 (Reuters) - An advisory council to Saudi Arabia’s government has asked the kingdom’s securities regulator to study the impact of listing Saudi Aramco on the local bourse amid concern that a huge initial public offering could damage the market.

The Shura Council’s fiscal committee has also asked the Capital Market Authority (CMA) to make sure that the stock market’s liquidity does not become concentrated in the giant oil company alone, state news agency SPA reported late on Tuesday.

The government has said it plans to sell about 5 percent of Aramco, hoping to raise some $100 billion or more in what would likely be the world’s biggest initial public offering (IPO). The sale is expected in the second half of 2018.

Saudi officials have said that in addition to Riyadh, they may list Aramco on one or more foreign markets such as New York, London and Hong Kong, which would spread the burden of the IPO and reduce the strain on the Saudi market.

But after more than a year of deliberations, a decision on a foreign market has not been announced and some officials have suggested Aramco might list in Riyadh alone.

There is concern in Saudi financial circles, however, that the IPO could be too large for the local market to absorb.

The SPA report did not say whether the CMA’s study should look at the impact of listing Aramco in Riyadh alone, or scenarios in which it was listed in Saudi Arabia as well as foreign markets.

The Saudi market only has a capitalisation of about $470 billion, meaning it could be destabilised by Aramco’s listing if other stocks are sold heavily to raise funds for investment in the oil company.

The Saudi exchange’s chief executive Khalid al-Hussan told Reuters this month that Riyadh hoped to be the only venue for the Aramco listing and could handle all of the IPO. Liquidity would not be a problem, he said.

The Shura Council and the Capital Market Authority had no immediate comment when contacted by Reuters on Wednesday. (Additional reporting by Tom Arnold and Saeed Azhar; editing by Andrew Torchia and David Clarke)

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