How Will Saudi Deal with Stock Market Plunge? l Inside Story

The disappearance of Saudi journalist Jamal Khashoggi is hitting the Saudi economy. Stocks plunged almost 7 percent in early trading on Sunday, wiping out all the gains it had made since the start of the year. The fall comes a day after US President Donald Trump threatened 'severe punishment' if Saudi Arabia was found to be responsible for Khashoggi’s disappearance, but Riyadh warned it would retaliate if economic sanctions are imposed on it.

As pressure mounts on Saudi Arabia, several US media organisations and business leaders have pulled out of a major investment conference in Riyadh. What was dubbed "Davos in the desert" is supposed to promote Saudi Crown Prince Mohammed bin Salman's reform vision for the Kingdom. So, where does that leave all his plans?

Presenter: Imran Khan | Guests Khalid Al Khater, economist and researcher at the Institute for New Economic Thinking at the University of Cambridge; Naeem Aslam, Chief market analyst at ThinkMarkets; Imad Harb, Director of Research and Analysis at the Arab Center Washington DC

Saudi Stocks Plunge 7% on Khashoggi Fallout

Saudi stocks plunged seven percent in the morning trading on Sunday amid international backlash over the disappearance of Saudi journalist Jamal Khashoggi in Turkey.

Saudi Arabia Contagion Triggers Gulf Rout
THE DAILY TELEGRAPH: Fears of sectarian uprisings in Bahrain and Saudi Arabia have set off the first serious wave of investor flight from the Gulf, compounding market turmoil as civil war in Libya pushes Brent crude over $116 a barrel.

Saudi Arabia’s Tadawul stock index has tumbled 11pc in wild trading over the past two days, led by banks and insurers. Dubai’s bourse has hit a 7-year low.

The latest sell-off was triggered by the arrest of a Shi’ite cleric in the Kingdom’s Eastern Province after he called for democratic reforms and a constitutional monarchy. The province is home to Saudi Arabia’s aggrieved Shi’ite minority and also holds the country’s vast Ghawar oilfield, placing it at the epicentre of global crude supply.

“Unrest in this region can have fatal consequences for the world,” said JBC Energy. “The plunge on the Saudi stock exchange can be interpreted as a sign of waning trust.”

In Bahrain, the island nation’s Sunni elite holds sway over a Shi’ite majority that is denied key jobs and has a token political voice, making it a trial run for Saudi Arabia’s near-identical tensions in the Eastern Province.

Bahraini dissidents have so far been much bolder, prompting a bloody crackdown last month when at least seven people were shot by the military. The ruling family – under intense pressure from Washington to stop the killings – has since held out an olive branch to protesters and let the radical Haq leader Hassan Mushaima return from exile, yet the crisis is far from contained.

My Mushaima said on Wednesday that protesters have “the right to appeal for help from Iran” if Saudi military units interfere in the struggle. Tanks were seen crossing the 17-mile causeway from Saudi Arabia to Bahrain on Tuesday.

“These were supposed to be Bahrain’s tanks returning from Kuwait: that is not a credible story,” said Siras Abi Ali, a Gulf expert at the risk group Exclusive Analysis.

He said the outcome in Bahrain will set the template for events across the border. “There is no good outcome from this for Saudi Arabia. If Bahrain offers concessions, the Saudi Shia will demand similar concessions. If they crack down, they risk an uprising. These people do not want to live under the House of Saud,” he said. >>> Ambrose Evans-Pritchard, International Business Editor | Wednesday, March 02, 2011

Foreign Direct Investment in Saudi Arabia’s Tadawul Seen as Next Step Following Swap Agreements
THE FINANCIAL TIMES: The introduction of swap agreements that permit indirect foreign investment in Saudi Arabia’s stock exchange is a step toward opening the market to direct foreign investment in the Tadawul, said local bankers.

“Next comes the removal of the swap contract and allowing foreign direct investment. There is no date. It could be months or years,” said Morgan Stanley Saudi Arabia managing director and chairman, Fahad Almubarak.

“The next step is to allow investors to buy directly instead of through swaps but I don’t think [the regulator] is in a hurry,” said one Riyadh-based banker.

The swap agreements allow an authorised local firm to trade on the Tadawul on behalf of a foreign client. Its introduction has been seen by bankers as a significant move by the Capital Market Authority (CMA) toward opening the market to foreign investment. “This is very much the opening up of the market. It is absolutely going to facilitate foreign investment in the underlying shares,” said HSBC Saudi Arabia CEO Timothy Gray shortly after the introduction of swap agreements was announced on 20 August.

Both Morgan Stanley and HSBC are authorised by the CMA to transact swap agreements with foreign investors.

Previously, investors outside the GCC were banned from trading on the bourse, except indirectly through mutual funds. The introduction of swap agreements will allow international funds to stock pick, said Almubarak. “It is very significant as Saudi Arabia has been closed to direct investment in specific stocks. Significantly, it will allow them to pick stocks and decide on the duration and the amount. Now investors will receive the direct economic benefit,” he said. Foreign Direct Investment in Saudi Arabia’s Tadawul Seen as Next Step Following Swap Agreements >>> By Victoria Robson in Dubai | September 3, 2008

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