Saudi Aramco's shares drop slightly ahead of MSCI index inclusion

The global index compiler is expected to assign Aramco a free float of 0.5%

Members of Saudi Aramco's management ring the opening bell to mark the start of trading in its shares on the Tadawul market in December. Courtesy of Saudi Aramco. 

Saudi Aramco's shares declined 0.6 per cent to close at 37.75 Saudi riyals (Dh36.96) ahead of the company's inclusion into the MSCI Emerging Markets Index on Wedensday.

The company's entry into the gauge is based on its closing price of Tuesday, which puts the overall valuation at more than $2 trillion (Dh7.34tn).

MSCI, whose emerging market gauge is tracked by investors managing trillions of dollars in investments, will assign Aramco a free float of 0.5 per cent, resulting in a weight of 0.17 basis points in the MSCI Emerging Markets Standard Index.

The inclusion is expected to bring $815 million in passive flows, according to estimates by Arqaam Capital in Dubai.

Ahead of the listing, Saudi bank Al Rajhi said that based on the higher end of the 30 to 32 riyal price range, the Tadawul All Share Index could attract up to 3.7bn riyals of passive flows from funds tracking the MSCI and FTSE Russell indexes.

The initial public offering of the world's most profitable company received $119bn in orders for the $25.6bn on offer, a 465 per cent oversubscription that eclipsed Alibaba's $25bn record for what was the largest listing until 2014.
Goldman Sachs, the stabilising manager for Aramco's IPO, meanwhile said on Tuesday that it would stabilise the offer. The stabilisation period is expected to end no later than January 9, 2020.

Aramco, on Tuesday also announced the completion of the acquisition of a 17 per cent stake in South Korea's Hyundai Oilbank for $1.25bn.

The Saudi state producer invested through the Aramco Overseas Company. The investment will support Aramco’s crude placement strategy by allowing for a dedicated outlet for Arabian crude in South Korea, one of the biggest buyers of Middle Eastern crude.

Hyundai Oilbank, a private operator, has 650,000 barrels per day capacity at a fully integrated refining plant at the Daesan complex. The company, which began operating in 1964, has around five subsidiaries with interests in refining, base oil, petrochemicals as well as a network of gas stations.