London Stock Exchange boost as Saudi oil giant snubs US in £1.6 trillion floatation deal
London and Hong Kong are emerging as the top competitors for the mega-float of Saudi oil giant Aramco as its owners shun the US.
The world’s biggest exchanges are battling for a slice of the government-owned business, which is worth up to £1.6trillion.
Many see the New York Stock Exchange as a major competitor – but last night a senior financial source in Saudi Arabia said US politics were a major impediment.
London is emerging as one of the top competitors for the mega-float of Saudi oil giant Aramco
He cited anger at the aftermath of the 9/11 attacks – when the Gulf nation was accused of supporting terrorism – and the end of sanctions on regional rival Iran.
‘I don’t think it will go to New York because of 9/11, which they punished Saudi Arabia for even though we had nothing to do with it,’ the source said.
‘Politically, it’s difficult.
‘President Barack Obama was very naive when it came to Iran – under Donald Trump the relationship is much better, but we’re aware that the President is not in control of everything.’
Concerns over America mean that the London Stock Exchange is likely to be the frontrunner for the initial public offering, which will be the biggest in history.
LSE boss Xavier Rolet joined Prime Minister Theresa May on a visit to Saudi earlier this month, attending talks at the country’s own exchange and a meeting between May and oil minister Khalid al-Falih, Aramco’s chairman.
Lat month, Theresa May met with Saudi oil minister Khalid al-Falih, Aramco’s chairman
Britain already has strong historical and trading ties with the kingdom, which took in £4.6bn of UK exports last year.
London’s time zone is also favourable, with only two hours’ difference.
And although the biggest concentration of investors’ cash is in the US, the City is thought to be a more flexible and welcoming place for foreign businesses.
However, it is facing fresh competition from Asia – and Hong Kong in particular.
The city is already one of a handful able to challenge London, and its importance will only grow alongside China’s rising middle classes.
Rivals: London is facing fresh competition from Asia – and Hong Kong in particular
A consortium of Chinese investors is expected to bid for shares, including nationalised oil companies and banks and the country’s sovereign wealth fund.
Shanghai has also put itself forward and is hosting Aramco executives for an overseas board meeting next month.
Up to 5 per cent of Aramco, worth an estimated £62.5bn, is to be listed next year.
A slice of that action will go to the Saudis’ own exchange but at least one foreign venue will also be involved.
Aramco has long been the jewel in the kingdom’s crown, producing enough oil to satisfy nearly an eighth of global demand.
The business was always jealously guarded from outside influence and its profits propped up a generous welfare state.
But falling oil prices have forced the government to change tack and raise cash on the international markets.
Brent crude has crashed by more than half since mid-2014 due to a price war between Saudi Arabia’s Opec cartel of oil-producing nations and US shale producers.
Opec sought to flood the market with cheap oil so that American rivals went out of business.
But US ingenuity meant they were able to cut their costs and survive as their competitors’ reserves slowly drained away.
An LSE spokesman declined to comment.