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Chinese State Firms May Invest In Aramco IPO To The Tune Of $10 Billion

Chinese State Firms May Invest In Aramco IPO To The Tune Of $10 Billion
Saudi Arabia is seeking commitments for investments from friendly governments to shore up the record share sale of a part of its state owned oil giant Saudi Aramco, and according to reports quoting sources, a total investment of between $5 billion and $10 billion in the oil major is being planned by a host of Chinese state-owned companies.
Work for the public floatation was officially initiated last week.
According to reports, one of the Chinese companies interested to invest in the Aramco IPO is the Beijing-based Silk Road Fund and negotiations for the same are currently underway. A number of other Chinese state-owned companies or funds will also participate according to reports.
The Belt and Road Initiative, a pet project of the Chinese President Xi Jinping, is being viewed as a means by Beijing to further enhance the political clout of China as well as to revive ancient trading routes. Making investment through state owned companies in Aramco will not only help China to strengthen its relations with Saudi Arabia but also to make profits from the investments with rise in global oil prices.
According to reports quoting Chinese sources, in recent months, talks about investing in the Aramco IPO have also been held by the sovereign wealth fund China Investment Corp and state-owned oil producer Sinopec Group. Reports however said that China and the Chinese companies have not yet confirmed the amount that they would invest in the IPO and the Chinese government would ultimately take a call on the amount that each of the state owned firms to invest in the public floating.
With an initial capital of $40 billion, the  Silk Road Fund was set up in 2014. A supplementary investment of 100 billion yuan ($14 billion) of funds was later invested in the company according to information found on its website.
Following skepticism expressed by Western money managers over the claimed valuation of the company Aramco, any large amount of investment in the Saudi Arabia IPO could help the company management and the Saudi government to make the share sale a success. A valuation for Aramco at $2 trillion was put on the company by Saudi Crown Prince Mohammed bin Salman when he had first floatd the idea of the IPO about three years ago. However according to recent reports on Bloomberg News, he is willing to reduce that valuation to between $1.6 trillion and $1.8 trillion.
There were no replies to the reports from Aramco and representatives of the Silk Road Fund and CIC, as well as Sinopec Group and its main listed unit. There were also no comments available in the media from China’s State-owned Assets Supervision and Administration Commission, which oversees the biggest government enterprises.
Aramco’s IPO is a “unique opportunity”, said the head of Russia’s sovereign wealth fund last week. Kirill Dmitriev said in a television interview in Riyadh that Russian investors are “keen to participate” in the deal.

Christopher J. Mitchell

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