Saudi bourse rises despite terrorist attacks

The three suicide bombings against Western compounds which left 36 dead in Riyadh last week failed to dampen the enthusiasm of local investors for Saudi stocks.

The Tadawul all-share index ended the week up 0.6%, and actually reversed a downtrend before the attacks. The index is now 19 per cent higher than at the start of the year and closed last week at 2,988.06 points, not far off the recent all-time high of 3,014.97 points set on April 21.

Nine commercial banks, newly privatized Saudi Telecom, Sabic and the Saudi Electricity Company comprise 85 per cent of the total market value of $104 billion, which is by far the largest in the Arab world.

Oil revenues had their best first quarter for more than two decades this year, and are a key economic driver as they make up 40% of GDP. This is fuelling economic growth across the kingdom.

Moreover, the $20 billion Saudi Gas Initiative involving Western companies in developing a new energy asset is set to go ahead within weeks, according to Oil Minister Ali Al Naimi, formerly the biggest opponent of the project and now apparently its biggest proponent.

Indeed, investors may reason that the terror attacks merely underline the need for economic reform in Saudi Arabia, and will hasten its implementation. All this will be good for economic growth, and encourage support for the existing regime. Shares will go higher yet.