HKEX

Hong Kong's stock exchange operator announced on Monday the signing of a memorandum of understanding (MOU) with its Saudi Arabian counterpart to explore partnerships in cross-listings as the Asian financial hub is pitching for Saudi Aramco's listing in Hong Kong.

There's a chance of the Saudi Arabian oil giant picking Hong Kong over other destinations for its secondary listing, an industry insider said, expecting the possible win to give the city's exchange operator a big boost in earnings.

Under the MOU, Hong Kong Exchanges and Clearing Ltd (HKEX) and Saudi Tadawul Group Holding Co, the stock exchange operator of Saudi Arabia, have plans to explore operations in fintech, environmental, social and governance, cross-listings and other areas, according to a statement by HKEX.

"The Kingdom of Saudi Arabia and the broader Middle Eastern region are one of the world's most dynamic and exciting economic and innovation hubs, and home to some of the fastest-growing investor groups in the world," read the statement, citing HKEX Chief Executive Officer Nicolas Aguzin.

The Hong Kong market offers significant opportunities for international investors and businesses, including unrivalled connectivity to the Chinese mainland markets through the stock link-ups between the Chinese mainland and Hong Kong, Aguzin said.

"As we seek to position the Saudi capital market as an investment hub between East and West, we are seeing increased interest from issuers and investors in Asia," said Khalid Al Hussan, CEO of Saudi Tadawul Group, adding the MOU would bring the exchanges closer to cross-listings.

HKEX joined a government and business delegation, led by John Lee Ka-chiu, chief executive of the Hong Kong Special Administrative Region (HKSAR), in its visit to the Middle East.

The Middle East trip was envisioned to get oil giant Aramco to float on the Hong Kong exchange, as the HKSAR chief executive eyed reaching a "substantial" number of deals during his trip, Hong Kong-based media outlet HKT reported.

"The conglomerate is very multi-dimensional. Besides oil, the firm has a lot of subsidiaries. We will do our best to introduce Hong Kong's advantages, and we encourage them to come to Hong Kong for different types of involvement, including getting listed here," Lee said after arriving in Riyadh, according to HKT.

It's not the first time that the Hong Kong market is being considered for Aramco's share sale. The city might stand out this time as Hong Kong is more appealing in terms of listing rules and procedures than London or New York, where a share offering could mean higher costs, Raymond Deng, investment strategist at DBS Bank, told the Global Times on Monday.

After raising $29.4 billion in a historic first listing at home exchange in December 2019,  Aramco has reportedly been mulling plans to list more shares through a secondary listing, with London, New York, Singapore and Hong Kong among the options being reviewed.

Still, whether the secondary listing could land in Hong Kong would largely be contingent on the local market capacity to host a listing as colossal as Aramco's, Deng said, estimating that the secondary listing would be ideally scheduled during the second half of the year.

If Hong Kong succeeds in getting Aramco to list, it would be a real shot in the arm for HKEX, Deng noted, citing depository and issue fees from derivatives to be launched alongside IPOs and other service commissions that make up a big part of HKEX's revenues.