The 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.
Stock markets across the Gulf region have suffered sharp losses this week amid a deepening crisis of confidence after a three-year bull market.
The Saudi bourse had lost a fifth of its value since Friday before yesterday's move, while the markets in Dubai, Abu Dhabi, Kuwait, Qatar and Bahrain have all lost ground.
Prince Alwaleed said his company, Kingdom Holdings, would inject between $1.3bn and $2.7bn (£765m and £1.6bn) into the market to combat the correction, which he blamed on speculators. The Saudi finance ministry also announced plans to allow the country's estimated 6 million foreign residents to invest directly in the Saudi stock exchange. It said it was also considering organising share-splits to lower the nominal prices of shares on the exchange to make it easier for small investors to buy into the market.
"Splitting shares is beneficial and allowing foreign residents [to invest] is a very good decision," the Saudi prince, who owns stakes in Euro Disney, News Corporation and luxury hotels across the world, said in a statement.
The Saudi all-share index closed up more than 4 per cent yesterday, almost wiping out Tuesday's losses. "The measures give confidence to the market but it's difficult to say how long their impact will last," one analyst said. Markets in the region have surged over the past five years as Middle East investors reaped the benefits of a rising oil price and Western investors sought out high-yielding investment in a low interest rate environment.
Markets in Egypt, Dubai, Saudi Arabia and the Lebanon doubled and several more saw returns of more than 50 per cent.
But as interest rates have started to rise across the developed world, investors are starting to pull their money out of riskier investments. Earlier this week Iceland's currency and stock market fell sharply.
Analysts believe that fears of a correction in the Middle East have been heightened by the recent political dispute over Dubai Ports World's takeover of P&O that forced DPW to sell the six US ports it would have acquired under the deal.Reuse content