Saudi bleeding bleed and Aramco IPO .. Is Mohammed bin Salman take responsibility?

محمد أفزاز Free Membership

Saudi Arabia's stock market fell to its lowest level in nearly 11 months on Tuesday, losing more than 4% since the beginning of this year. It reduced losses in morning trading on Wednesday before returning to decline again, at a time when experts and observers believe that the near-subscription process in Aramco put negative pressure on dealers in the market, along with expectations of weak results for local companies.

Saudi Arabia's stock index fell sharply in yesterday's trading, with all listed banks falling ahead of the third-quarter results, as expectations remain weak.

The main index of the Saudi market fell 1.6% yesterday, its lowest level since November 2018. In morning trading today fell more than 0.7%, after trying to reduce losses at the opening.

Saudi banks' third-quarter results are expected to be affected by the central bank cutting interest rates twice in August and September, which analysts say will put pressure on its revenues.

"Overall, the outlook for Q3 results is dim," Reuters quoted Al Mal Capital Portfolio Manager Fragish Bhandari as saying. "The interest rate cuts are negative on the margins as a large part of the deposits are cost-free and loan growth is not impressive."

The Saudi index has fallen in 10 of 11 sessions this month, a loss of 4.2% since the beginning of the year, and a decline of more than 8% in the third quarter.

Ask Aramco
Saudi Aramco's near-IPO may have put negative pressure on the Saudi stock market, observers say.

Taha Abdul Ghani, general manager of Namaa Financial Advisors, did not rule out that talk of an initial public offering of Aramco on the bourse had caused the Saudi bourse to fall.

"If there is a local listing, it may be at a preferential price, which is a good opportunity for traders, and on that basis they will sell their existing shares pending the start of the IPO," he said.

But Abdul Ghani, speaking to Al Jazeera Net, appeared convinced that the Saudi war in Yemen and the recruitment of military forces from abroad and the tension with Iran and the strike against Aramco facilities, all factors drained the Kingdom's budget and affected the development projects, and then affected the attractiveness of the Saudi market for investors.

Aramco's imminent launch is "a key factor in the market's fall for the seventh consecutive session," Mubasher Info quoted analysts as saying, amid caution in the near term.

Saudi Aramco Chairman Yasser Al-Rumayan said yesterday that the initial public offering of the state-owned oil producer would be announced "very, very soon."

Some observers are pessimistic about the ability of the Saudi stock market to absorb the listing of Aramco shares in the local market.

"The market maker is waiting for the exit of small investors," Arqaam reports. "The market is not going to go up," he said.

Some believe that the bleeding in the Saudi stock market is due to "uncertainty and vague statements," referring to a statement made by Aramco's chairman.

Others argue that offering liquidity for IPO could be done in ways other than "stock burning", which means selling them to provide funds for the upcoming IPO.

Saudi Arabia is seeking to sell 3% of Aramco on the local bourse by November, the Financial Times said on Tuesday.

Saudi Crown Prince Mohammed bin Salman is counting on selling a stake in Aramco to raise $ 100 billion to help him achieve his plan to diversify the economy away from oil, through a local initial listing before heading to other global exchanges.

Aramco's initial public offering is expected to start in the coming days, which Bloomberg saw as an opportunity to test Saudi confidence in Mohammed bin Salman.

The IPO is facing difficulties in overestimating the value of Aramco, which the Saudi crown prince hopes will be around $ 2 trillion, while experts estimate it is worth only $ 1.5 trillion.

The IPO plan also faces other obstacles related to the possibility that the volume of demand for Aramco shares could be affected by the decline in oil prices.

Saudi Aramco is expected to meet its advisers on October 17, according to people familiar with the scheme.

Lower than expected economic growth
Adding to the pressure on the Saudi market, new estimates by the International Monetary Fund (IMF) forecast the kingdom's economy to grow 0.2% this year, instead of a previous estimate of 1.9%.

The IMF has linked the decline mainly to oil production cuts, although its World Economic Outlook report said it was difficult to assess the economic impact of last month's attack on two Aramco oil facilities, which halved production in the world's top crude exporter.

The Saudi economy has been suffering for years due to low oil prices and austerity measures aimed at reducing a huge budget deficit.