Saudi Arabia prods blue chips to list more shares

Saudi Capital Markets Forum

• Framework out for consultation
• Plan to increase ‘free float’
• PIF sold telecom shares in 2021

Saudi Arabia is prodding blue-chip companies on its stock exchange to offer more shares to the public as part of a drive to become a global financial centre. 

Abdullah Binghannam, deputy head of financing and investment at the kingdom’s Capital Market Authority, told a markets forum in Riyadh on Tuesday that a regulatory framework was being put in place for follow-on market offerings. 

The framework is out for public consultation, he said, and would allow “large shareholders to float additional shares within a process that is governed and regulated, which is a catalyst for increasing free float”. 

• Mena VC exit route remains uncertain in young sector
• Opinion: Stock-picking in Chinese, US and Middle East markets
• Saudi Arabia and UAE to dominate Mena IPOs in 2024

Binghannam pointed to the example of the Public Investment Fund selling its shares in Saudi Telecom to the public in 2021. Follow-on offerings will boost a company’s weight in market indices and raise the status of Saudi capital markets in global rankings, he said. 

The Capital Market Authority is currently considering 56 initial public offering requests, officials said this week. This is a 30 percent increase on last year. Stock exchange operator Tadawul will hold its first capital market forum outside the country in Hong Kong in May. 

Government ministers told the Riyadh forum that debt and derivatives markets were a key priority in boosting the Saudi financial market, as well as share offerings on the publicly traded platforms.

State oil giant Aramco has said it is likely to issue a bond this year. Chief financial officer Ziad Al Murshed told the forum on Monday that the company would prioritise longer tenures of up to 50 years when issuing bonds. 

Aramco last tapped global debt markets in 2021, when it raised $6 billion from the sale of a three-tranche Islamic bond.

There are also market expectations of a second Aramco share offering in the works after Bloomberg said Aramco had approached major banks to work on a sale that could raise nearly $20 billion. 

“We see a huge opportunity in the debt market. The yield curve is being built, which helps corporates and semi-government entities in pricing,” Abdullah Alshwer, CEO of Riyadh Capital, told the forum on Tuesday. 

“The peg of the riyal to the US dollar brings comfort to international investors. Once the interest rate stabilises in the near future we expect more issuances coming up.”