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Stock Analysis, IPO, Mutual Funds, Bonds & More

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

Saudi Aramco is aiming to raise $20 bn-$40 bn in a domestic IPO in early December. ​

Reuters|
Nov 16, 2019, 01.52 PM IST
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Agencies
Saudi Aramco
MSCI, the world's biggest index provider, will follow in the footsteps of S&P Dow Jones and FTSE Russell, which told clients this week that they could fast-track Saudi Aramco's inclusion into their indexes as soon as December.
MSCI, the world's biggest index provider, will follow in the footsteps of S&P Dow Jones and FTSE Russell, which told clients this week that they could fast-track Saudi Aramco's inclusion into their indexes as soon as December.

Typically, providers of indexes which are tracked or used as a benchmark by investment funds would add newly listed companies during their rebalancing reviews, conducted quarterly or semi-annually, depending on the index.

State-owned Saudi Aramco, the world's most profitable company, is set to launch a share sale process on Nov. 17, aiming to raise $20 billion-$40 billion in a domestic initial public offering (IPO) in early December.

The oil giant is due to announce the pricing of its IPO on Nov. 17, but it is unclear whether more details around timing will be disclosed.

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'.

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

"However, if the IPO listing date is after December 12, 2019, MSCI would postpone the implementation until after January 5, 2020," it said in a note to clients on Friday night.

It added that it would do so to avoid lower liquidity during the Christmas period, when trading thins.

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