Dubai: Saudi Aramco shares gained for a third straight session since its record market debut and valuation of the oil behemoth hovered at the long-sought $2 trillion mark.
Shares, which rose to a limit of 10 per cent on its debut on Wednesday and a little over 4 per cent the following day, ended 1.6 per cent higher at a share price of 37.4 Saudi riyals on Sunday.
“After the positive momentum, now the markets will be back to fundamentals which create revenue and margin risks for Aramco: correlation to oil prices, the conditions of global economy, and recent developments in the trade talks between US and China,” said Mohamed Zidan, chief market strategist for ThinkMarkets in Dubai.
Analysts expected Aramco’s shares to trade higher this week, but were cautious against how high the move would be. Zidan said earlier he believed there would be a slowdown in the upward trajectory currently seen in Aramco’s share movement.
It is logical to see profit-taking after having reached the targeted market capitalisation, Zidan added. From the listing price of 32 riyals, shares debuted at 35.2 riyals on the Riyadh stock exchange and has risen 6 per cent so far.
Investors will focus on Aramco’s inclusion in major equity indices this week.
MSCI Inc., which compiles the most popular emerging-market equities index, will add Aramco to its benchmarks using the closing price of Dec. 17. FTSE Russell will follow suit using the price of December 19.
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.
Analysts at Al Rajhi Capital, Aljazira Capital and KAMCO Research said earlier the firm’s addition into major global indices such as MSCI and FTSE could lure a further $4 billion to Saudi Arabian equities.
“The bigger question is what is going to be its weight — we are still waiting for MSCI to publish this number,” said Pritish Devassy, a senior analyst at Al Rajhi Capital. “The number depends on a lot of factors such as free float, liquidity, maximum foreign shareholder limit,” he added. Aramco’s shares, which were initially valued at $1.7 trillion, have since hit $2 trillion, a value long-mooted by Saudi Crown Prince Mohammed bin Salman. The IPO is the lynchpin of the de-facto leader’s plans for diversifying the economy away from its dependence on oil.
Investors abroad and analysts have been sceptical about the firm’s valuation, calling it “ambitious” in the face of volatile oil and gas prices and as it may face threats from environmentalists to cut emissions and curb climate change even as it claims to be ‘the cleanest major oil company’.