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17 November 2019

S&P Dow Jones, FTSE Russell could fast-track Saudi Aramco into indices

The state-owned energy giant is set to launch a share sale process on 17 November 2019.


Index providers S&P Dow Jones, MSCI and FTSE Russell told their clients that they could fast-track Saudi Aramco’s inclusion into their indices as soon as the end of December, reported Reuters.

FTSE Russell and S&P Dow Jones started adding Saudi stocks to their emerging markets indexes in March 2019, while MSCI added Tadawul—Gulf region's largest market—into its Emerging Markets Index August 2019, with a weight of 2.8 per cent.

Saudi Aramco is set to launch a share sale process on 17 November 2019, aiming to raise $20 billion-$40 billion in a domestic initial public offering (IPO) in early December. 

While a large part of the offer is set to be sold to retail investors, when the company is added to the global indexes and what proportion of them it will account for will influence demand for the shares from overseas money managers, particularly now that Saudi Arabia has been classified as an 'emerging market'.

In a briefing to clients, S&P Dow Jones said that it would consider the state-owned oil company big enough for fast-track inclusion into its Global Benchmark Indices, based on the minimum float-adjusted market capitalisation of at least $2 billion.

Companies would normally be required to ensure that at least 10% of their stock was made available to trade by investors, but while Saudi Aramco would not meet this level, S&P said it could make an exception.

S&P stated that its Index Committee has reviewed this case and ruled that, given the expected size and liquidity of this IPO, an exception to the foreign availability rule will be made for Saudi Aramco if it meets all other index criteria for fast-track IPO addition to SPDJI's Global Benchmark Indices.

Similarly, MSCI, whose indexes are used by funds with trillions of dollars in assets globally, said that if Saudi Aramco starts trading on or before 12 December 2019, it would add it to the MSCI Equity Indexes from 17 December 2019.




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