Saudi Arabian bourse to ensure Aramco’s weighting in index is not too big

Saudi Arabia’s stock exchange will ensure the weighting of national oil giant Saudi Aramco in its main stock index is not too large when the company lists its shares. (Screenshot)
Updated 02 May 2018
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Saudi Arabian bourse to ensure Aramco’s weighting in index is not too big

  • Saudi authorities plan to sell 5 percent of Aramco’s shares and list the firm in Riyadh and possibly one or more foreign markets this year or next
  • The Saudi exchange’s ability to cope with such a huge listing is a major concern among investors

RIYADH: Saudi Arabia’s stock exchange will ensure the weighting of national oil giant Saudi Aramco in its main stock index is not too large when the company lists its shares, the exchange’s chief executive said on Wednesday.
“We have technical ways to address this issue,” Khalid Al-Hussan told the Euromoney business conference, adding that one step might be to impose an “index cap” on Aramco . He did not elaborate on how such a cap might work.
Saudi authorities plan to sell 5 percent of Aramco’s shares and list the firm in Riyadh and possibly one or more foreign markets this year or next, as part of wide-ranging reforms designed to reduce the Saudi economy’s reliance on oil.
The Saudi exchange’s ability to cope with such a huge listing, which could involve the world’s biggest initial public offer of equity, is a major concern among investors.
The local stock market currently has a capitalization of about $500 billion, while officials have said the sale is expected to value the whole of Aramco at about $2 trillion.
Petrochemical shares already account for around a quarter of the market’s capitalization, so with Aramco, the market could become dominated by oil-related shares and end up moving almost entirely in synch with oil prices, unless steps are taken.
Hussan reiterated previous statements that the exchange had tested its technical systems and these, as well as the regulatory environment, were ready for the Aramco listing.
In the past, the exchange has said it hopes to be the only market in the world to list Aramco shares. The government has not said whether this will be the case and Hussan did not discuss that matter on Wednesday.
The exchange announced on Wednesday the creation of a central counterparty clearing house with capital of 600 million riyals ($160 million) to handle securities trading.
The clearing house, to operate fully by the second half of 2019, will reduce risk in settlements and enable the introduction of new asset classes such as derivatives, the exchange said. It aims to introduce derivatives in the second half of 2020.
Foreign institutions were allowed to begin investing directly in the Saudi stock market in mid-2015, and there are now 140 qualified foreign investors, with over 40 percent of them registered in the last quarter, said Mohammed El Kuwaiz, chairman of the capital market regulator.
He said his priorities for the coming year would include the listing of new companies on the stock market, including privatised firms; strengthening external and internal audits for listed firms to improve the quality of the market; and developing a corporate bond market


Shareholders of India’s Jet Airways approve debt-for-equity swap

Updated 2 min 38 sec ago
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Shareholders of India’s Jet Airways approve debt-for-equity swap

  • The plan will mean the lenders will have a bigger holding than any other shareholder
  • Currently, Chairman Naresh Goyal owns a 51 percent stake in the company and Abu Dhabi’s Etihad Airways owns 24 percent

MUMBAI: India’s Jet Airways said late on Friday that its shareholders approved a plan to convert existing debt to equity, paving the way for the troubled company’s lenders to infuse funds and nominate directors to its board.
Jet’s board last week approved a plan by lenders, led by State Bank of India, for an equity infusion, debt restructuring and the sale or sale-and-lease-back of aircraft.
The plan will mean the lenders will have a bigger holding than any other shareholder.
Currently, Chairman Naresh Goyal owns a 51 percent stake in the company and Abu Dhabi’s Etihad Airways owns 24 percent.
Jet, which had net debt of 72.99 billion rupees ($1.03 billion) as of end-December, has debt payments looming next month, according to rating agency ICRA. It has been unable to pay pilots’ salaries and has outstanding bills to aircraft lessors.
The company, India’s biggest full-service carrier, is struggling with competition from budget rivals, high oil prices and a weaker rupee. The share price took a beating in 2018, losing nearly 70 percent of its value.
In a regulatory filing, Jet said on Friday that 98 percent of its shareholders voted to increase the share capital to 22 billion rupees ($309.8 million) from 2 billion rupees at a special meeting.
Jet, whose financial woes are set against the backdrop of wider aviation industry problems, has been in the red for four straight quarters.