Tadawul has contingency plans to handle full Saudi Aramco IPO

Khalid Al-Hussan, CEO of the Saudi Stock Exchange (Tadawul), is ready for the Saudi Aramco IPO in whatever shape it comes. (Reuters)
Updated 02 May 2018
0

Tadawul has contingency plans to handle full Saudi Aramco IPO

  • Tadawul has capacity to handle entire listing
  • Stock exchange has central counter-party clearing house

RIYADH: The Riyadh stock exchange has a range of options for a possible listing of shares in Saudi Aramco later this year, the chief executive of Tadawul told Arab News.

Khalid Al-Hussan said that the exchange was ready to list all the shares in a potential initial public offering of 5 percent of Aramco shares, which could be worth $100 billion at current official estimates.

Speaking on the sidelines of the Euromoney conference in Riyadh, he said: “The Saudi economy has the capacity to take care of the whole IPO. There is untapped capacity outside the exchange if we need that, from corporates, individuals and foreign investors.”

Some experts have cast doubt on the Tadawul’s ability to digest such a big share offering as Aramco, which would account for nearly 20 percent of its market capitalization of around $530 billion.

They have argued that other stock markets, like New York or London, would have to be involved in the IPO, or that some shares could be sold to private investors.

Al-Hussan’s comments will add to increasing speculation that the government is leaning toward a Saudi listing before the end of this year.

He insisted that the exchange was ready and able to undertake the full listing, if asked, though he allowed that the final decision was up to the government, which would issue the shares.

“It has been determined clearly that the Tadawul is the home exchange, but the issuer will make the decision on whether it is the only exchange. What we have done is to prepare a case for each scenario, so that whenever we get the full detail on the IPO, we will have done our preparation. We have looked at all the contingencies for each scenario.”

However, he made clear that his preference was to undertake the IPO exclusively on Tadawul. “I aspire to have the whole IPO on Tadawul. But of course I’m looking at it from an exchange point of view, whereas the owner is looking at it from a national point of view,” he said.

Al-Hussan said that all the necessary regulatory, technological, operational and human preparation had been done to allow a full Aramco IPO. “We are all ready to welcome such a unique national IPO as Aramco onto the Tadawul,” he said.

“If the world comes to Aramco (via an exclusive listing on Tadawul), we are open to that and our market is accessible. If Aramco goes to the world (by listing on another market in addition to Aramco) we welcome that too, and we are ready to compete with the global exchanges,” he said.

Tadawul — the biggest and most liquid exchange in the Gulf — has been talking to other regional exchanges about the possibility of dual listings ahead of what is expected to be a rush of IPOs as the Saudi privatization program gets underway. Al-Hussan said this process was ongoing.

“We have to focus on bringing more IPOs to market, we have to persuade corporates of the benefits of going public. We are telling them to start the process of due diligence now in preparation. When you pull the trigger to go public, that is your decision, but you have to be ready,” he said.

Tadawul also announced that it has set up a central counter-party clearing house in order to diversify investment opportunities and bring in new asset classes such as derivatives.

“This will enable Saudi companies to hedge against risks, which will enhance the attractiveness of the Saudi capital market to all investors. It will improve risk management of the market buy introducing new mechanisms to ensure that the settlement is compete and that all parties meet their obligations when settling trades in the market.

The new clearing house has been set up in the from of a closed joint stock company with SR600 million ($159.9 million) of capital. Equity settlement is expected to start in the second half of next year, with derivative settlement a year later.

FASTFACTS

Factoid

A 5 percent listing of Saudi Aramco stock could be worth as much as $100 billion


Iraq to ask US for exemptions on some Iran sanctions

Updated 2 min 25 sec ago
0

Iraq to ask US for exemptions on some Iran sanctions

BAGHDAD: Iraq’s economy is so closely linked to Iran that Baghdad is going to ask Washington for permission to ignore some US sanctions on its neighbor, Iraqi government and central bank officials said.

US President Donald Trump withdrew the US from an international deal aimed at limiting Iran’s nuclear program earlier this year and reimposed trade sanctions.

Washington has said there will be consequences for countries that do not respect the sanctions.

Baghdad is in a difficult position. Iraq imports crucial supplies from ally Iran, but its other major ally is the US, which provides security 
assistance and training.

The request would mark an 
important change in political tactics for Iraqi Prime Minister Haider Al-Abadi. He initially said Baghdad would respect all the US sanctions, but faced heavy criticism from rivals.

The officials told Reuters a delegation will travel to Washington to ask for exemptions in applying the sanctions. They did not say when that trip would take place.

“The government plans to ask Washington for a waiver. It’s going to happen soon,” one central bank 
official said.

An official in Abadi’s office declined to comment. An official in the US State Department said it was discussing Iran policy with its partners around the world.

“We have given the same message to all countries around the world that the President has said, the United States is fully committed to enforcing all of our sanctions,” the official said.

“Iraq is a friend and important partner of the US and we are committed to ensuring Iraqi stability and prosperity.”

Iraqi officials fear shortages of key items if Baghdad complies with all the sanctions, which could lead to political turmoil at a delicate time in Iraqi politics.

Iraq imports a wide range of goods from Iran including food, agricultural products, home appliances, air conditioners and spare car parts. The goods element of Iranian imports to Iraq was about $6 billion for the 12 months to March 2018, about 15 percent of Iraq’s total imports for 2017.

Energy contracts between the two countries contributed to a volume of trade of $12 billion last year.

The officials said they were asking each ministry to put together a list of imports that are essential for Iraq’s economy. Those items will make up the request for exemptions.

The US sanctions that came into 
effect earlier this month target Iran’s trade in gold and other precious metals, its purchases of US dollars and its car industry. Other sanctions will come into force in November.