Bourse chief confident Hong Kong will net world’s biggest IPO candidate Saudi Aramco

HKEX chief executive Charles Li believes the oil giant will choose Hong Kong for its international listing despite the trade war threat rattling the local market

PUBLISHED : Thursday, 21 June, 2018, 7:04pm
UPDATED : Thursday, 21 June, 2018, 7:04pm

The head of Hong Kong’s stock exchange said he is confident oil giant Saudi Aramco, the world’s largest IPO candidate, will list its shares in the city even as he warned of “tough times” ahead for the market amid a simmering trade spat between China and the US.

“The potential trade war between the US and China would change the relationship between the two economies. It will be a tough time for the stock market,” said Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing.

Despite the threat of an all-out trade war causing volatility in the stock market last week, Li said the outlook for IPOs remains strong and the city could host the what would be the world’s biggest initial public offering.

“I am confident Saudi Aramco will choose to list in Hong Kong eventually. Even if it doesn’t come on day one, I am confident it will list here later,” he said.

Saudi Aramco is expected to launch the largest IPO in history, raising up to US$100 billion in a listing that would give the state-owned energy behemoth a valuation of US$1 trillion to US$2 trillion.

While it has not yet announced a listing timetable, stockbrokers believe Aramco is considering selling 5 per cent of its equity in both domestic and international markets, with Hong Kong, London and the US in a race to secure the foreign listing.

Senior officials from Hong Kong have actively courted the IPO. Chief Executive Carrie Lam Cheng Yuet-ngor and then-HKEX chairman Chow Chung Kong met Saudi Arabia’s King Salman, Crown Prince Mohammed bin Salman, and the ministers of energy and finance in December to promote the city as a venue for the shares debut.

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Aramco sent senior executives to meet with officials from Hong Kong’s Securities and Futures Commission last year to discuss the flotation.

Li said Aramco may favour Hong Kong because it is close to mainland China, which is a large oil consumer. The city’s location in an Asian time zone is another advantage because investors would be able to trade while the western market is closed.

Li is also optimistic that many unicorns – start-ups valued at more than US$1 billion – will list their dual-class shares here after Xiaomi becomes the first to do so through its huge IPO next week. It follows a major shake-up of listing rules in April which allowed big tech companies with multiple classes of shareholder to list for the first time.

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Xiaomi hopes to raise up to US$6.1 billion in Hong Kong in the biggest IPO globally for two years. However, the smartphone maker this week abruptly decided to drop plans to tap mainland investors via China depository receipts (CDRs).

“I do not know the reason but I guess the company may consider it would be too risky and too complicated to list in Hong Kong and the mainland via CDR at the same time,” said Li.

“Hong Kong is a free market so we welcome Xiaomi to issue CDR if it likes after listing in Hong Kong.

“The listing reform in April was the largest in 25 years in Hong Kong. We may have a party to celebrate the listing of Tsingtao Brewery which was the first H-shares listing in Hong Kong 25 years ago, together with Xiaomi which is the one weighted-voting company to list here. We may see the first wave of strong listings before the summer break.”