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Stocks

Market Scramble: Tokyo covets spot in Saudi Aramco's global IPO

Mega listing would jazz up Japanese bourse

TOKYO -- The Tokyo Stock Exchange was previously said to be a long shot for being picked as one of the venues for Saudi Aramco's multi-country listing -- but the chances have apparently increased, if slightly.

Initial public offerings have been hot in Tokyo these days, and Friday was no exception. Shanon, which debuted on the TSE Mothers exchange, remained bid-only all day. The Quick IPO index, which tracks stocks that have been trading publicly for less than a year, stands at the highest in about nine and a half years -- and has been far outperforming the TSE Mothers index for several months.

"We are seeing more companies with earnings and growth potential," said the underwriting head at Daiwa Securities. "Retail investors have strong interest in them."

In late December, Japan Exchange Group CEO Akira Kiyota traveled to the Saudi Arabian capital of Riyadh, hoping to meet with Deputy Crown Prince Mohammed bin Salman -- even though he did not have a confirmed appointment. "If there is even the slightest chance of seeing him, I'm going," the Japanese executive was heard saying.

Kiyota did get to meet with the deputy crown prince, making a sales pitch directly for the government to offer shares in Saudi Aramco on the Tokyo market. He passionately described how Japanese individuals own financial assets totaling 1.7 quadrillion yen ($14.8 trillion) and said ample money is waiting to invest in the world's largest oil company.

The state-owned corporation, also known as Saudi Arabian Oil Co., is valued at an estimated 200 trillion yen, and the government is apparently planning to sell 5% of the equity -- worth roughly 10 trillion yen -- in several markets in 2018. The selection of exchanges will likely be made by the middle of this year, with New York, London, Singapore and Hong Kong seen as strong candidates besides the home market.

Tokyo was a long shot to be included, but things are starting to change under U.S. President Donald Trump. Rumors have it that Riyadh is annoyed by the Trump administration's pro-Israel stance and could even skip listing in New York. On top of that, Saudi Arabia's King Salman happens to be scheduled to visit Japan this spring.

"We had zero possibility before but the chance has increased to 10%," said an excited TSE official. "We'll aim for a come-from-behind grand slam." An Aramco IPO in Tokyo would be sure to energize the market here. "It will entice individuals into the stock market," said Takeshi Fukushima of BlackRock Japan.

A mega-IPO would draw the interest of novice investors, an underwriting officer at a major brokerage noted hopefully. Several brokerages are said to be already approaching the oil giant to sound out a chance to underwrite its partial public offering. "If we can get Aramco here, that would enhance the TSE's presence internationally," TSE President and CEO Koichiro Miyahara said.

Even besides Saudi Aramco, the TSE has been reaching out to other leading overseas companies in effort to attract foreign listings. Any mega-IPO would work wonders to excite Japanese individuals and get them to jump into the stock market.

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