State funds support Saudi

Dubai : Buying by government-linked funds supported Saudi Arabia’s stock market yesterday, asset managers said, but most other Gulf bourses fell as the Saudi crackdown on corruption sent shivers through the region.

After falling in early trade, Riyadh’s index rebounded in the closing minutes to finish 0.1 per cent higher in active trade - repeating its pattern on Sunday, when it ended up 0.3pc after an early tumble.

Several regional fund managers said they believed Saudi state-linked funds were deliberately supporting the market to prevent a panic after a new anti-corruption committee detained dozens of leading political and business figures.

Although many investors think the crackdown could be positive for Saudi Arabia in the long run, by addressing a longstanding problem and increasing the power of reformist Crown Prince Mohammed bin Salman, there are fears that people implicated may be forced to liquidate their investments.

Al Tayyar Travel plunged its 10-percent daily limit after the company quoted media reports as saying its founder Nasser bin Aqeel al-Tayyar, who holds direct and indirect stakes totalling 29.72pc in the firm, was being held in the probe.

Kingdom Holding, which had tumbled 7.6pc on Sunday after its billionaire chairman Prince Alwaleed bin Talal was detained, sank a further 5.3pc. National Industrialization Co (Tasnee), in which Kingdom holds a 6.2pc stake, fell 1.2pc.

After the close on Sunday, Kingdom said it had the support of the Saudi government, and its share price is now close to the company’s book value as of June 30.

But the anti-corruption committee has the power to seize assets at home and abroad before the results of its investigations are known, so investors worry that significant amounts of wealth could disappear from the market.

Declining stocks outnumbered gainers by 135 to 42. Among the gainers were state-linked firms expected to play key roles in Prince Mohammed’s economic development plans, such as National Commercial Bank, up 2.9pc.

Other Gulf markets dropped as jittery retail investors sold stocks because of the uncertainty in Saudi Arabia, said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain.

However, some other fund managers said there could be a chilling effect on Gulf bourses in general if investment flows from Saudi Arabia shrank because of the crackdown, or if Saudi investors were forced to repatriate funds.

Saudis are estimated to own several per cent of some Gulf stock markets, and are significant investors in some Gulf real estate markets. They traded 12.5 billion riyals ($3.4bn) of Dubai property in the 18 months through June, according to official Dubai data.

Dubai’s stock index sank 1.2pc yesterday as high-end developer Emaar Properties dropped 1.8pc and DAMAC Properties lost 2.0pc.

Abu Dhabi’s index sagged 0.4pc as Aldar Properties fell 2.2pc. Qatar dropped 1.4pc as Qatar International Islamic Bank slid 3.4pc in its heaviest trade for several months.

In Kuwait, blue chips fell sharply in what analysts said was profit-taking after sharp rises early this year on the back of expectations for index compiler FTSE Russell to upgrade the country to emerging market status.

National Bank of Kuwait tumbled 4.5pc and logistics giant Agility lost 2.8pc.