Saudi Tadawul to limit Aramco index weighting with cap

The Aramco IPO is seen as a test for the Saudi exchange, where the largest listing so far has been worth $6 billion. (Reuters)
Updated 02 December 2019

Saudi Tadawul to limit Aramco index weighting with cap

  • State-owned oil firm Aramco is expected to list 1.5 percent of its shares this month
  • Institutional bids during the first 15 days of the bookbuilding period amounted to SR144.16 billion

DUBAI: Saudi Arabia’s Tadawul has introduced an equity index cap of 15 percent which is set to address concerns over the weighting oil giant Saudi Aramco will have when it lists on the exchange.
State-owned oil firm Aramco is expected to list 1.5 percent of its shares this month in a deal which could raise more than $25 billion and top the record initial public offering (IPO) of Chinese retailer Alibaba on the New York Stock Exchange in 2014.
Samba Capital, NCB Capital and HSBC Saudi Arabia, the joint financial advisors and joint global coordinators for Saudi Aramco’s initial offering, said on Monday that institutional bids during the first 15 days of the bookbuilding period amounted to SR144.16 billion, with 4.551 billion shares subscribed for.
The institutional bookbuilding period continues until December 4, 2019.
The Aramco IPO is seen as a test for the Saudi exchange, where the largest listing so far has been worth $6 billion.
“Any constituent whose index weight reaches or exceeds the threshold will be capped in accordance with the set limit,” Tadawul said in a statement on Monday.
The move is part of a broader update of Tadawul’s index methodology, including a revision of the free float shares calculation methodology for shares owned by government entities.
The new measures will “ensure more balanced indices, which will accurately represent the movement of the market, enhance disclosures and transparency and minimize securities’ dominance,” Tadawul’s CEO Khalid Al-Hussan said in a statement.
Tadawul also said it has applied a new “Fast Entry” rule allowing shares of IPOs to be included in the all-share equity index at the close of the fifth trading day.
The updates will be effective by the end of the year.


Mexico objects to labor enforcement provision in North American trade deal

Updated 15 December 2019

Mexico objects to labor enforcement provision in North American trade deal

  • Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage
  • US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico

MEXICO CITY: Mexico’s deputy foreign minister, Jesus Seade, said on Saturday he sent a letter to the top US trade official expressing surprise and concern over a labor enforcement provision proposed by a US congressional committee in the new North American trade deal.
Top officials from Canada, Mexico and the United States on Tuesday signed a fresh overhaul of a quarter-century-old deal, aiming to improve enforcement of worker rights and hold down prices for biologic drugs by eliminating a patent provision.
How labor disputes are handled in the new United States-Mexico-Canada Agreement (USMCA) trade deal was one of the last sticking points in the negotiations between the three countries to overhaul the agreement.
Intense negotiations over the past week among US Democrats, the administration of Republican US President Donald Trump, and Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage.
However, an annex for the implementation of the treaty that was presented on Friday in the US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico.
“This provision, the result of political decisions by Congress and the Administration in the United States, was not, for obvious reasons, consulted with Mexico,” Seade wrote in the letter. “And, of course, we disagree.”
USMCA was signed more than a year ago to replace the North American Free Trade Agreement (NAFTA), but Democrats controlling the US House of Representatives insisted on major changes to labor and environmental enforcement before voting.
The letter, released on Saturday, is dated Friday and addressed to US Trade Representative Robert Lighthizer. Seade said he would travel to Washington on Sunday to raise the issues directly with Lighthizer and lawmakers.
“Unlike the rest of the provisions that are clearly within the internal scope of the United States, the provision referred to does have effects with respect to our country and therefore, should have been consulted,” Seade wrote.
Both Canada and the US House Ways and Means Committee said the deal included a mechanism for verification of compliance with union rights at the factory level in Mexico by independent labor experts.
Some Mexican business groups bemoaned a lack of clarity and conflicting information on how the rules would actually be enforced under the deal, the first text of which became public only on Wednesday.