Alwaleed to invest billions to boost Saudi stocks

The Saudi stock market breathed a sigh of relief Wednesday as multibillionaire Saudi Prince Alwaleed bin Talal, one of the world's richest men, intervened yesterday to stem the plunge in the value of the country's stock exchange vowing to pump equity into the battered bourse.

Saudi stocks have rebounded after the announcement by Alwaleed to invest significantly in the Saudi bourse.

Stock markets across the Gulf region have suffered sharp losses this week amid a deepening crisis of confidence after a three-year bull market. After Tuesday, when Gulf markets suffered one of their biggest falls, retail investors were still nervous yesterday, pushing down markets in Dubai, Abu Dhabi, Bahrain, Qatar and Kuwait. However, Saudi Arabia, the region's biggest equity market, was the exception.

The move by Alwaleed, a nephew of Saudi Arabia's king and the world's eighth richest man, already seems to have had the desired effect. A slump had erased nearly one-third of the value of the Saudi Tadawul All-Shares Index--the country's key benchmark--but Saudi shares today rallied almost 4% after the prince's announcement.

Prince Alwaleed said his company, Kingdom Holdings, would inject between .3bn and .7bn (£765m and £1.6bn) into the market to combat the correction, which he blamed on speculators. The prince has been an extremely active investor of late.

In January, he unveiled a .9 billion deal to buy Canada's Fairmont Hotel & Resorts. He listed his hotel holdings on the Dubai stock exchange in February.

Like other bourses in the region, the Saudi stock market suffers from a lack of deep liquidity. Most markets do not allow foreign investors into the market as easily as local investors, with the Cairo stock exchange being a rare exception. The Prince's decision came as the Finance Ministry said it might allow foreign residents to invest directly.

However, this correction has at least given regulators reason to reconsider trading rules and allow for easier foreign investment in order to balance the trading mix. Even in Cairo's market, local investment drives two-thirds of daily trading.

As such, almost every major public company in the area has members of the royal families sitting on the boards. The result is a sort of visible hand propping up the market in times of crisis, exemplified by Prince al-Waleed's promise Wednesday.
“We know there is a lot of wealth in this region,” Sameh EL Torgoman, the former head of the CASE and now a board member on the Dubai International Stock Exchange, said in an interview last month. “The question is, how do you use this wealth?”