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
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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


EU sets out plans for ‘limited’ US trade deal

Updated 1 min 9 sec ago
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EU sets out plans for ‘limited’ US trade deal

  • Negotiating a trade deal was included in a transatlantic truce secured last year
  • EU governments were shell-shocked last year when Trump imposed tariffs on metals imports as part of his ‘America First’ vision

BUSSELS: The EU on Friday published its negotiating plans for a free trade deal with the US, part of an effort to avert a trade war with US President Donald Trump.
Negotiating a trade deal was included in a transatlantic truce secured last year after the US slapped tariffs on steel and aluminum imports from the EU, alarming the world.
The effort is also part of an effort to stop Trump from slapping tariffs on European car imports, a danger that has especially unnerved export powerhouse Germany.
“It is not a traditional (trade deal)... it is a limited but important proposal engaged on industrial goods tariffs only,” EU trade commissioner Cecilia Malmstrom told reporters.
The process however has got off to a rocky start, with the US side last week including agricultural products in their plans, which is an absolute no-go for the Europeans.
“In this mandate, we are not proposing any reduction of tariffs on agriculture. That area was left outside,” Malmstrom insisted.
The 17-page mandate submitted by the US also included other demands and charges that are unacceptable for the EU, including that Europe stop manipulating foreign exchange rates.
Given the split, the EU is entering the negotiations with trepidation, especially since the threat of auto duties is still very much alive in Washington.
The commission handles trade negotiations for the EU’s 28 member states and the plans must now be approved by the national governments before negotiations actually start with Washington.
Brussels and member states are wary after the failure of the so-called TTIP talks, a far more ambitious transatlantic trade plan which stalled amid fears a deal with Washington would undermine EU food and health standards.
Opposition by activists has already resurfaced with Friends of the Earth Europe warning that “there can be no trade-offs on food standards” in the deal.
EU governments were shell-shocked last year when Trump imposed tariffs on metals imports as part of his “America First” protectionist vision.
Brussels responded by slapping counter-tariffs on more than $3 billion in US exports like bourbon, blue jeans and Harley-Davidson motorcycles.
But Trump and European Commission President Jean-Claude Juncker in July called a truce, agreeing that as both sides pursued a trade deal, neither would impose additional tariffs.