Saudi committee to study IPO impact

Fears in Saudi Arabia that Aramco’s IPO could have negative effect on local bourse.

Aramco's IPO is likely to occur later in 2018.
Aramco's IPO is likely to occur later in 2018.

A government advisory council has asked Saudi Arabia’s securities regulator to study the impact of listing oil giant Saudi Aramco on the local stock exchange amid concern that the vast initial public offering (IPO) could adversely affect the market, according to Reuters citing the state news agency.

The Shura Council's fiscal committee has also requested the Capital Market Authority (CMA) to make sure that the stock market's liquidity does not become concentrated solely on the oil company.

The government plans to sell off 5% of Aramco, hoping to raise $100bn in what would be the world's biggest IPO. It is thought the sale will take place later this year.

Saudi financial experts fear that the IPO could prove too large for the local bourse to handle.

The state news agency report did not state whether the CMA's study should look at the impact of listing Aramco in Riyadh alone, or situations in which it was listed in Saudi Arabia in addition to foreign exchanges.

The Saudi market has a capitalisation of about $470bn, meaning it could be overwhelmed by Aramco's listing if other stocks are sold off to raise capital for investment in the oil company.

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