We rarely like bond investments with the sole purpose to fund payments of large dividends, and we are of the view the E, S, and G credentials of Aramco are not advantageous. However, we realise that there will be discussions across more than a few teams if the risk-return potential in buying Aramco bonds should outweigh potential reputational downsides and negative ESG impact.
We can illustrate how the Aramco 4.45 2039 bonds have been trading almost exactly in line with the CDX.EM index. The correlation once we switch out to a weekly sampling frequency is quite strong. Considering that CDX.EM is considerably more liquid than cash bonds and has little need for duration hedging (for investors who trade on a spread basis), this suggests that the index could be a good replacement. Indeed, when going through a more technical analysis, we find few compelling arguments to own the bonds rather than the index.