A significant majority of senior executives across the Arabian Gulf expect Saudi Aramco's planned IPO to help capital markets throughout the region, attracting new investors and boosting liquidity, according to new research commissioned by The National.
A survey of more than 500 high-level executives, conducted by research company Borderless Access on behalf of The National, found that 90 per cent of Saudi executives agreed that the proposed IPO of a stake in the country's oil giant "will mark a watershed moment for the region's capital markets, providing much needed liquidity and broadening the investor base," with 53 per cent strongly agreeing.
Sentiment was similarly bullish among UAE respondents, with 84 per cent agreeing with the statement, 61 per cent agreeing strongly.
Plans for the sale of shares in Saudi Aramco, the world’s largest oil producer, were announced by the Prince Mohammed bin Salman, the Saudi deputy crown prince, in January.
The sale of about 5 per cent of the company forms the cornerstone of the country's National Transformation Programme, or Vision 2030, ambitious economic reforms designed to reduce the kingdom's reliance on oil revenues.
The sale of shares in Aramco is expected to be the largest IPO in history, surpassing the US$25 billion float of Chinese online retailer Alibaba in 2014, and is expected to have a seismic impact on capital markets in Saudi Arabia and the wider Arabian Gulf region.
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The road ahead
■ Throughout the year, The National will be running reports focused on sentiment within the business communities in the UAE and Saudi Arabia around a series of key issues affecting the regional economy as we look ahead to 2017 and beyond. Survey results will be provided by the online marketing and research firm Borderless Access. Email business@thenational.ae or WhatsApp 056 995 1624 to tell us what matters most to you.
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“The Aramco IPO at current estimates would amount to $100bn, almost 25 per cent of the total KSA market cap and will represent around 40 per cent of the total free float market cap available,” said Jaap Meijer, the head of equity research at Arqaam Capital.
“Furthermore, the listing will increase transparency of one its largest government entities, which we believe should set a strong precedent for other companies.”
Amin Nasser, Saudi Aramco’s chief executive, said in July that the company was studying whether to list shares exclusively in Saudi Arabia or to simultaneously list on an overseas exchange. The country’s stock market, the Tadawul, this month introduced reforms making it easier for qualified foreign investors (QFIs) to buy Saudi equities, and it plans to introduce changes to settlement cycles next year.
But Aramco’s IPO should also benefit the wider Arabian Gulf region, with fund managers more likely to look for other investment opportunities in markets such as the UAE and Qatar.
“Such a sizeable IPO will put Saudi Arabia and the Gulf on the radar of international fund managers, who will then look for other good stories from around the region,” said Tariq Qaqish, the managing director of asset management at Al Mal Capital in Dubai.
“Fund managers will always look at a region’s weight before deciding whether to take positions there. When the market capitalisation of the region increases all of a sudden [with the Aramco IPO] we will be more on their radar.”
Aramco has already appointed JP Morgan Chase and Michael Klein as advisers on the deal, according to reports by Bloomberg in April.
“The listing of Saudi Aramco is an exciting event for even lazy investors,” said Dushyant Gupta, senior vice-president at Borderless Access. “And when the listing is about to give birth to the largest publicly traded oil company in the entire world, then it generates massive reaction as well. Respondents in both markets show similar excitement with [the] more active financial market [the] UAE showing stronger endorsement on the ‘strongly agree’ scale.”
The National Transformation Programme contains an ambitious set of objectives aimed at massively expanding the country’s non-oil revenues from a current baseline of 163.5 billion Saudi riyals (Dh160bn) to 530bn riyals by 2020. The kingdom’s government is aiming to create more than 450,000 private-sector jobs, and to build up the value of its non-oil assets from 3 trillion riyals currently to 5tn by 2020.
jeverington@thenational.ae
Read Saudi Arabia's National Transformation Plan here.
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