Saudi Aramco is bolstering relationships with China, most recently having acquired a 10% share of oil refining firm Rongsheng Petrochemical Co. for $3.6 billion.
This came just 24 hours after the oil giant Aramco entered into a joint venture with two other Chinese oil companies to build a refinery in the northeast of China.
Such deals are creating a fertile ground for the conjecture that Aramco could list one of its subsidiary companies on the Hong Kong Stock Exchange (HKSE).
Speculation aside, the question is why not list at these opportune times with rapprochement the key theme here between the two countries?
The next move after Tadawul?
Aramco did do a partial listing on the Tadawul Stock Exchange in 2019 in a record-breaking IPO that saw the kingdom sell three billion shares, equivalent to 1.5 percent of Aramco’s share capital, which raised a historic $25.6 billion.
In January 2016, Saudi Crown Prince Mohammad bin Salman announced he would sell a total of 5 percent of Aramco through an IPO, and raise $100 billion, valuing the company at $2 trillion. This means that more IPOs are to follow.
Read: Saudi strengthens strategic relations with China
Top Chinese Diplomat Saudi visit
Two months after Chinese President Xi Jinping visited the kingdom in December 2022 when he and Saudi Crown Prince Mohammed bin Salman concluded commercial agreements valued at more than $29 billion, Hong Kong’s leader John Lee visited Saudi in February this year, where over 2 days, he stressed on Aramco executives the need for the oil giant to list in the Hong Kong financial hub despite competition from rivals such as New York and London.
The New York Stock Exchange (NYSE) was one place Aramco had eyes on for its original IPO and perhaps even now. But financial markets like NYSE create challenges for a state giant like Aramco, including needing reams of information to the Securities and Exchange Commission (SEC) and exposing the company to potential US-born legal claims that could target the company’s assets more easily.
Now Hong Kong does not have the stature of New York or London and actually plays second fiddle to Singapore which is widely considered to be Asia’s primary financial center, but the Chinese city still holds its own weight on international markets.
Aramco listing in Hong Kong would give further credence to Saudi credentials as an international economic power, while the city would benefit from huge limelight after 3 years of lockdowns that caused an exodus of foreign firms.
China is also Aramco’s largest export market.
A secondary listing of Aramco subsidiaries in Hong Kong could inspire more Middle Eastern companies to consider the city as a listing venue but would also allow Aramco to access demand from investors in mainland China, however, the listing would then need to be a primary one.
In December, Hong Kong’s securities regulators said foreign companies that meet market-capitalization criteria and other requirements with primary listings in Hong Kong could be eligible for inclusion in the Stock Connect trading link with mainland China.
A Hong Kong listing for Aramco may make sense when taking into account Beijing and Riyadh’s recent geopolitical considerations but it would also make commercial sense for both sides.
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