What’s next for Saudi Aramco share price after US$2.03 trillion valuation?

The headlines surrounding Saudi Aramco’s (Tadawul: 2222) initial public offering this December have mostly been hyperbolic, and as it appears, rightfully so.

The state-owned oil and gas firm’s IPO on the local stock exchange earlier this month has not only surpassed expectations; it shattered all records to become the biggest listing in history with US$25.6 billion raised.

Upon launching, share price immediately shot beyond the projected fluctuation limit of 10%, achieving a valuation of US$2.03 trillion on day two of trading, a feat for a flotation of its size.

Earlier this week on Monday, 16 December, shares were trading as much as 21% above the listing’s opening price of 32 Saudi riyals (US$8.53) per share.

Can share price stay at the same level?

With the market reception so far having been nothing short of impressive, how will share price move in the coming months?

This would depend on a multitude of political factors, according to analyst Ariel Cohen, Director of the Energy, Growth, and Security Program at the International Tax and Investment Center.

Those factors include ‘uncertainty due to low oil prices, climate change concerns, and geopolitical unrest in the region’, Cohen wrote in a commentary on Forbes.

He added that global criticism for the murder of Saudi Arabian journalist Jamal Khashoggi, tanker incidents in the Persian Gulf, as well as foreign missile attacks on two oil facilities in September, also ‘justly appear as strong disincentives for long-term institutional investors’.

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Lacking international investors

Additionally, with the bulk of funds so far made up of local institutions and government agencies, ‘current investment still lacks the international diversification sought by executives’, Cohen further noted.

Saudi Aramco’s shares are set to become available on foreign bourses starting later this week, including the Morgan Stanley Capital International Emerging Markets Index and the FTSE All-World Index.

Cohen stated that while the local listing has been ‘unequivocally impressive’, the ‘real test’ will come as shares become available overseas.

‘This week should provide better insight into the appetite of international investors, and the longer term viability of the historic IPO,’ he concluded.

Saudi Aramco shares are currently trading at 36.30 riyals.

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