Saudi Aramco hits $2 trillion goal; global stocks at record peak

Saudi Aramco hit the $2 trillion target sought by Saudi Crown Prince Mohammed Bin Salman on Thursday as its shares racked up a second day of gains. Aramco’s initial public offering (IPO) is the centrepiece of the Saudi crown prince’s vision for diversifying the kingdom away from its oil dependence by using the $25.6 billion raised to develop other industries.

Aramco shares hit 38.7 riyals ($10.32), lifting its market value above $2 trillion and closed at 36.8 riyals, a rise of 4.5% from Wednesday’s close and valuing the company at $1.96 trillion, Refinitiv data showed.

While a 10% jump in the stock on its debut, the maximum allowed by the Riyadh exchange, was hailed by the Saudi government as a vindication, support was largely from loyal Saudi and Gulf rather than overseas investors.

The IPO was front page news in mainstream Saudi media, with headlines such as “Aramco at the top of the world” and “A dream come true”.

Some 15.9 billion riyals worth of Aramco shares were traded by the close, with around 417.7 million shares exchanging hands, Refinitiv data showed. This made up most of the total turnover of the whole Riyadh market which was 18.5 billion riyals.

“Initial price action has validated our thesis that Aramco discounted its IPO price to leave upside on the table and allow regional investors to benefit from the listing of its crown jewel,” Zachary Cefaratti, CEO of Dubai-based Dalma Capital, which invested in the IPO, said in a note on Thursday.

“The average institutional investor received less than 1/6th of the shares they bid for in the IPO, and have had to buy shares on the open market,” Cefaratti said of the Aramco deal, which became the world’s largest, topping the $25 billion 2014 listing of China’s Alibaba.

The successful completion of the IPO has also led to a strengthening of Aramco’s dollar bonds, which are now trading at yields closer to Saudi Arabia’s sovereign debt.

“It makes sense for Aramco to trade level with the sovereign, as Saudi Arabia’s economic is still so dependent on oil, but the goodwill from the IPO has certainly helped,” one banker who worked on the Aramco bond issue said.

Most of the early trading was small scale, of 1,000-1,500 shares, a trader in Riyadh, who asked not to be identified, said, adding this signalled that some retail investors were “happy with a 6 riyal per share gain”.

Aramco shares will also join the Tadawul index and global benchmarks such as MSCI and FTSE next week, which analysts said should fuel demand, particularly from “passive” investors.

Separately, World stocks hit a record high on Thursday, passing an all-time peak set in early 2018, on investor enthusiasm the United States and China were close to an initial deal to defuse a prolonged trade war. Shares moved sharply higher after US President Donald Trump said in a tweet that the two countries were “getting VERY close to a BIG DEAL.”

The MSCI all-country world index, which tracks shares in 49 countries, climbed to 551.84 points to surpass the previous record of 550.63 points set on Jan. 29, 2018.

The index has risen more than 20% this year, helped as well by a lowering of interest rates and injections of government stimulus around the world.

Wall Street rallied shortly after the open on Thursday as President Donald Trump said Washington and Beijing were close to a “BIG DEAL” on trade.

The tweet instantly lifted the mood among investors, who had been holding their breaths, awaiting a decision from the White House on whether to proceed with a new round of tariffs on Chinese goods.

Investors were also digesting commentary from the European Central Bank, which on Thursday tweaked its eurozone growth forecasts and said a slowdown could be stabilizing.

About 15 minutes into the day’s trading, the benchmark Dow Jones Industrial Average was up 0.6 percent at 28,066.37.

The broader S&P 500 and tech-heavy Nasdaq had gained both 0.4 percent at 3,152.71 and 8,691.84 respectively.

Oil prices rose on Thursday, recouping some of the previous session’s losses after Opec forecast a supply deficit next year and the US Federal Reserve held interest rates steady and struck an optimistic tone on the outlook of the economy.

Prices had fallen on Wednesday after a report showed an unexpected increase in US crude inventories. Brent rose 45 cents, or 0.7%, to $64.17 a barrel by 1241 GMT. West Texas Intermediate crude was up 30 cents, or 0.5%, at $59.06 a barrel.

Agencies