• 5 minutes 'No - Deal Brexit' vs 'Operation Fear' Globalist Pushback ... Impact to World Economies and Oil
  • 8 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 12 minutes Will Uncle Sam Step Up and Cut Production
  • 2 hours OPEC will consider all options. What options do they have ?
  • 12 hours Maybe 8 to 10 "good" years left in oil industry * UAE model for Economic Deversification * Others spent oil billions on funding terrorism, wars, suppressing dissidents, building nukes * Too late now
  • 17 hours Russia Accuses U.S. Of Stoking Tensions With Missile Test
  • 4 hours Recession Jitters Are Rising. Is There Reason To Worry?
  • 8 hours What to tell my students
  • 1 hour With Global Warming Greenland is Prime Real Estate
  • 13 hours TRUMP'S FORMER 'CHRISTIAN LIAISON' SAYS DEEPWATER HORIZON DISASTER WAS GOD'S PUNISHMENT FOR OBAMA ISRAEL DIVISION
  • 9 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 4 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 8 hours CLIMATE PANIC! ELEVENTY!!! "250,000 people die a year due to the climate crisis"
  • 1 day In The Bright Of New Administration Rules: Immigrants as Economic Contributors
  • 14 hours Flaring is at Record Highs in Texas
  • 1 day Get First Access To The Oilprice App!
Alt Text

Imagining A Global Solar Empire

Global equity markets took a…

Alt Text

Can Oil Markets Withstand Recession Fears?

The trade war escalation combined…

Alt Text

Global Renewables Investment To Hit $13.3 Trillion By 2050

Global investments in renewable energy…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Can The Saudi Exchange Survive The Aramco Listing?

Last week the chief executive of Saudi Arabia’s stock exchange Tadawul tried to reassure potential investors in Aramco that the bourse will cap the weight of the oil company in the its index to avoid a disproportionate representation of the oil industry. But this sounds easier said than done and it might well be a mixed blessing.

Riyadh eyes US$100 billion in proceeds from the Aramco listing. The figure has been challenged more than once including by internal audits, so the actual proceeds from the listing could be half that amount. Still, most observers are worried that the oil company could overburden Tadawul—a small exchange, in which petrochemical stocks already represent about 25 percent of the index.

Capping the company’s weight is the obvious move to make in these circumstances, but as Saudi expert Ellen R. Wald wrote recently in a story for Forbes, it presents a new problem: if Aramco’s natural dominance on the Tadawul index is artificially limited, some investors interested in buying Tadawul index options because of Aramco’s presence on it might think twice before doing it.

An extension of this problem is the fact that Aramco’s presence in the stock mix on Tadawul would have a positive impact on investor appetite for other stocks listed on the Saudi exchange. Again, if the weight of this presence is limited, the positive impact will be limited as well.

Yet there is no real alternative to this weight-capping. Tadawul’s total market cap to date is around US$500 billion. If Aramco is listed without a weight cap, it could take up about 40 percent of this market cap, according to CEO Khalid al-Hussan as quoted by Reuters earlier this month.

Forty percent of an exchange is too much for a single company, especially one that will be added to an already solid presence of the oil industry on the exchange. This solid presence of oil on Tadawul will without a doubt affect the price movements of non-oil stocks, effectively deepening Saudi Arabia’s dependence on the industry it wants to wean itself from. Related: Is This The End Of Diesel Trucks?

Even with a cap on Aramco’s weight in the Tadawul index, however, the stock market will reinforce the Kingdom’s reliance on oil, Wald notes. In other words, a single listing at home will to an extent betray the purpose of the Aramco IPO: ensuring funds for the diversification of the Saudi economy away from oil.

Yet a single listing at home is what is on the table right now. Talk about an international listing has gradually died off as doubts about the company’s valuation and legal and transparency-related challenges multiplied. Such a listing would have provided more breathing space for Tadawul, or, as Wald puts it, “the burden – or euphoria – from its price fluctuations would be shared.” Yet in its absence, all the burden or euphoria is reserved for the Saudi stock market.

"It is almost doubling the size of the Saudi market and that is definitely changing our position as far as size ... (And) will change the dynamics of how the Saudi capital market — as well as the economy — operates," Al-Hussan recently told CNBC. Whether the change will be for better or worse remains to be seen.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play