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Research Market strategy
by Swissquote Analysts
Morning News

Saudi Aramco Revs Up IPO Plans to List as Soon as Early Next Year

Topic of the day

Saudi Arabia's state oil company is revving up plans for an initial public offering and accelerating the timeline for what would be the world's biggest listing to as soon as early next year, according to people familiar with the discussions. The IPO of state-owned Saudi Arabian Oil Co., known as Saudi Aramco, is being sped up as government officials hope to capitalize on the positive international reaction to the company's debut bond sale in April, which raised $12 billion, people close to the talks said. Saudi officials also believe pressure on the country following the murder of dissident journalist Jamal Khashoggi in the Saudi consulate in Istanbul is easing, according to people familiar with the matter. The Saudi government needs the proceeds from the IPO to finance social and military spending, and to direct toward Neom, a futuristic city Saudi Arabia is building at a cost of $500 billion. Higher public spending will push Saudi Arabia's budget deficit to 7% of gross domestic product in 2019, well above the government's forecast of 4.2%, the International Monetary Fund said in May. The world's largest IPO was meant to be the centerpiece of a Saudi plan to open up the economy and give investors access to the world's most profitable company. Crown Prince Mohammed bin Salman previously announced he would list 5% of Aramco in 2018 at a valuation of roughly $2 trillion for the entire company. Even floating 5% of the company would constitute the world's largest IPO at around $100 billion.

Swiss stocks

On Friday, the Swiss stock market was able to escape the downward trend on most other stock markets in Europe. There, the government crisis in Italy in particular put more pressure on stock prices, which on Thursday evening opened up as an additional negative factor alongside the US-Chinese trade war for Europe and the EU in particular. The SMI fell only slightly to 9,750 points. The daily winner in the SMI was the insurer Swiss Re with a plus of 0.9 percent. Zurich Insurance advanced by 0.6 percent. Zurich Insurance had raised its outlook the day before after the quarterly report, which led to price target increases of analysts. Roche and Nestle increased by 0.9 percent and 0.8 percent, respectively, while Nestle increased to 106.38 Swiss francs. Jefferies analysts had commented positively on Nestle's quarterly results, raising its target price to 121 from 115 francs. In particular, they praised the Group's tax management in view of a lower tax rate, leaving room for positive surprises.

International markets

Europe

The Stoxx Europe 600 was down 3.15 points, or 0.84%, on the day and ended the week down 1.74% at 371.56. The index now is down 19.17 points, or 4.91%, over the last two weeks. The FTSE 100 continued to slide in afternoon trading, finishing the day down 0.4% amid worsening trade tensions, news that the British economy had contracted in the second quarter, and political turmoil in Italy signaling possible snap elections. Meanwhile, the German DAX was down 151.61 points, or 1.28%, on the day and ended the week down 1.50% at 11693.80. The French CAC was down 60.04 points, or 1.11%, on the day and was down 0.58% at 5327.92 for the week. The British pound on Friday came under renewed assault, as data showed the U.K. economy contracted in the second quarter reinforced concerns about future growth if the country leaves the European Union without an agreement.

United States

Stocks declined, capping a tumultuous week where investors ricocheted between risky and safe assets as they reacted to the trade war and emerging currency fight between Washington and Beijing. President Trump in the morning suggested a meeting with China on trade might be canceled, putting downward pressure on stocks. The S&P 500 dropped 0.7%, while the tech-heavy Nasdaq Composite fell 0.3%. The Dow Jones Industrial Average lost about 90 points, or 0.3%. After all the big swings of recent days, all three major indexes closed the week with modest drops of less than 1%. "We're not ready to make a deal, but we'll see what happens," Mr. Trump told reporters. "We will see whether or not China keeps our meeting in September."

Asia

Asian bourses were mixed in cautious trading Monday. Equities in Hong Kong, China and South Korea advanced, while they were little changed in Australia and Taiwan. Markets in Japan and Singapore were closed for holidays.

Bonds

U.S. government bonds gained Friday after Donald Trump said trade talks between the U.S. and China scheduled for next month could be canceled. The yield on the benchmark 10-year Treasury note fell to 1.688%, from 1.710% Thursday.

Analysis

H&A raises Ströer target to 80 (72) EUR - Buy
CFRA raises Novo Nordisk target to 350 (330) DKK - Hold
Warburg: New PNE strategy bears fruit - Buy
CS raises Axa target to 28,50 (27) EUR - Outperform


Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.

 
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