Saudi Aramco
Saudi Aramco will finish its first full week of trading with a loss of 4 per cent Image Credit: AFP

Dubai: Oil behemoth Saudi Aramco will finish its first full week of trading with a loss of 4 per cent, closing at 35.5 Saudi riyals ($9.46) per share on Thursday.

Shares had traded in the red for three straight sessions, after rising for four days after listing on December 10, when it was first offered for 32 riyals ($8.53), The stock is still up 11 per cent from its IPO price.

“Aramco shares entered a healthy corrective wave driven by taking profit and taking advantage of the ample liquidity after listing in the Saudi index and MSCI Emerging Markets index,” said Mohamed Zidan, Chief Market Strategist for ThinkMarkets in Dubai.

Investors pocketed profits after Aramco’s shares joined the popular MSCI Emerging Markets index and the local Saudi Tadawul index on Wednesday and global benchmark FTSE on Thursday, serving as a foundation for several passive investment vehicles and likely spurring higher demand as funds tracking the indices to buy up shares.

Despite this week’s tumble, Aramco still has a market value of $1.9 trillion. The company hit the $2 trillion price tag long-sought by Saudi Crown Prince Mohammed bin Salman on its second day of trading, but lost momentum on Tuesday.

Analysts had been cautious against how high the move would be this week and had forecasted that gains would slow when compared to a week ago, saying it would be logical to see profit-taking after having reached the targeted market capitalisation.

More profit-taking

“It’s a highly probable scenario to see the profit-taking continuing into next week as we are at the year end and most of investors are closing their position,” Zidan added.

Shares have traded for seven days in total, adding 8 per cent as of Monday’s close after touching a high of 38 riyals, but declined about 5 per cent since then. Aramco has a 31.57 riyals ($8.42) consensus price target from the three analysts covering the firm, according to Bloomberg data.

“The price could stabilise near 35/34 riyal price levels and a price range of 33/34 would be seen as a good levels to build a long position on the oil giant,” Zidan added. “Institutional investors still see Aramco as a good pick in their portfolio because of it is cash flow and dividends yield which reduces the risks of holding the stock.”

Aramco’s IPO is the centrepiece of Prince Mohammed bin Salman’s vision for diversifying the kingdom away from its oil dependency by using the $25.6 billion raised to develop other industries.

Analysts had balked at the lofty valuation goal, given that it faces uncertainty due to low oil prices, climate change concerns and geopolitical unrest in the region. Global backlash for the murder of Saudi journalist Jamal Khashoggi, tanker attacks across the Arabian Gulf, and the missile strikes against plants at the heart of Saudi Arabia’s oil industry were widely argued as strong deterrents for long-term institutional investors.

Analysts at Jefferies this week initiated coverage of the stock with a sell-equivalent rating, estimating Aramco’s value at $1.6 trillion and citing governance concerns due to the close relationship between the firm and the Saudi government.