Deals

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Singapore's desire to host the IPO of Saudi Arabian Oil Co. is understandable. Whether the city-state is the best venue for what could be the world's largest ever share sale is another matter.

The island is considering a range of measures to lure Aramco, including inviting one of its state investment companies to become a cornerstone investor. And Singapore is Asia's No. 1 oil-trading center, so investors should have a good understanding of the industry.

But there are plenty of reasons other cities stand a better chance. Singapore's average daily stock trading was about $761 million last year, well below Hong Kong and London, and IPO volumes aren't what they were.

This Merlion Doesn't Roar
Singapore IPO volumes have dwindled in recent years
Source: Bloomberg

Hong Kong also has a slew of Chinese state-owned enterprises willing to come into new share listings as cornerstone investors. It would be great if Aramco could snare one of them. Russia overtook Saudi Arabia as China's top oil supplier for the first time last year, so there's a lot a stake. Closer ties with companies in Asia's biggest economy would be no bad thing.

The chequered history of foreign listings in Singapore is another factor. While the 2006 float of Chang beer maker Thai Beverage Pcl has outperformed, Hutchison Port Holdings Trust's $5.45 billion debut in 2011 went the other way. Units never closed higher than their $1.01 offer price and are currently at $0.43. Plans to lure English soccer team Manchester United also came to naught, putting another nail in the coffin of Singapore's rather ambitious desire to become a global sporting hub.

Singapore Slight
Thai Beverage's IPO has outperformed but not Hong Kong's Hutchison Port Holdings
Source: Bloomberg

Furthermore, there aren't any actual oil and gas companies listed in Singapore, just oil-services firms and rig builders like Keppel Corp. Understanding an industry isn't the same as understanding stock-market fundamentals.

Landing even a small slice of Aramco would be a massive coup, but Singapore, for all its billions and best intentions, may not have what it takes.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net