* Saudi expects to float 5 pct of state oil company for $100
* HKEX hopes to leverage deep-pocketed China investors to
* Bourse will have to overcome its own rule restrictions
By Michelle Price
HONG KONG, Feb 27 Hong Kong's stock exchange
will bank on its role as a gateway to mainland China's
deep-pocketed investors to take on other leading venues and win
the coveted $100 billion listing of Saudi Arabia's giant state
oil company, Aramco, it said on Monday.
Charles Li, the CEO of Hong Kong Exchanges and Clearing
(HKEX), said access to Chinese capital and China's
role as the world's largest importer of oil made Hong Kong a
viable contender in the frantic race between listing venues.
Chinese banks are also expected to play a part. Industrial
and Commercial Bank of China International and China
International Capital Corporation (CICC) are among the Chinese
banks pitching for an advisory role.
"For an IPO of that scale, it makes perfect sense to
potentially be accessible by the very large capital base and
investment wealth onshore in China," Li told reporters during an
earnings briefing, adding it also made sense for Aramco to have
a listing in Asia.
He said the Hong Kong stock exchange has had discussions
with Aramco and is working "very hard" to snag what is expected
to be the world's biggest ever IPO. He gave no details on any of
the concessions Hong Kong is expected to make for the deal.
Li's comments come as Saudi Arabia's King Salman on Sunday
kicked-off a month-long Asia tour to promote investment and
court investors for the IPO. The monarch is visiting Malaysia,
Indonesia, Japan and China.
Saudi authorities plan to list up to 5 percent of the
world's largest oil producer on the Saudi stock exchange in
Riyadh, the Tadawul, and also one or more international markets,
potentially raising as much as $100 billion. One source familiar
with the pitching process confirmed Asia was being considered by
Aramco as a listing venue.
With a focus on China's wealth and its strategic importance
to Saudi Arabia - the kingdom is among the biggest suppliers of
crude to China - the HKEX is seen as having an edge over
potential Asian rival bourses in the race to bag the giant IPO.
The Tokyo Stock Exchange, which has made efforts to woo
Aramco, according to two sources, has less liquidity than Hong
Kong and has seen foreign companies steadily delist over the
past decade with only a handful of foreign listings remaining.
The Singapore Exchange is also keen to get a
piece of the Aramco IPO pie, sources have said, but would again
face numerous challenges given its smaller size.
The Hong Kong bourse, the world's No.1 IPO market in 2015
and 2016, famously lost the record $25 billion IPO of Chinese
Alibaba Group Holding to New York because it could not
offer the ecommerce giant dual-class shares.
Again here, some listing rules in Hong Kong would have to be
circumvented if HKEX is to clinch Aramco's IPO, according to one
person involved in pitching Hong Kong to the oil giant.
Currently, the rules do not allow companies to list less
than 15 percent of their total number of issued shares, while
Saudi is also not currently an accepted jurisdiction of
incorporation for Hong Kong listed entities. A secondary listing
could also be tricky since HKEX does not currently recognise
Saudi's Tadawul as a legitimate primary listing venue.
Regulatory sources said the exchange does have discretion
over how the rules are applied and is able to grant waivers in
special circumstances as it did in the case of some Chinese bank
listings. Russia's Rusal was also able to create a
Jersey-incorporated entity in order to raise $2.2 billion
through its Hong Kong IPO in 2010, they added.
"Even so, I think the Hong Kong Securities and Futures
Commission (SFC) will have issues with the lack of disclosure
around Aramco," said one of the sources involved in pitching a
Hong Kong listing. "This could set the HKEX up for another clash
with the SFC."
HKEX's Li did not respond to a question on the regulatory
challenges the IPO could pose for the exchange.
The SFC declined to comment. Aramco did not immediately
respond to a Reuters query for comment.
(Reporting by Michelle Price; Additional reporting by Tom
Arnold, Rania El Gamal and Saeed Azhar in DUBAI; Editing by