Complex Made Simple

Are GCC capital markets panicking post Prince Alwaleed detention?

CNNMoney reported Sunday, October 5 that Prince Alwaleed’s arrest wiped off $750 million approximately from his personal fortune.

In all likelihood, the prince will survive that loss, being one of the 50th richest people on earth.

Read: 7 famous business deals by Saudi Prince Alwaleed Bin Talal

Read: Detainees in Saudi anti-corruption probe revealed

The prince, whose net worth is estimated at $19bn in Bloomberg Billionaires Index, owns equity across many business sectors including Twitter, Citigroup, Jeddah Tower, Careem, the Four Seasons and Accor Hotels.

But losses in the region’s stockmarkets could be fatal to some businesses, which may or may not survive a fluid situation that is developing by the hour and which could only negatively affect GCC markets if it continues.

Has it already had a negative impact on these markets?

Down, but not out

Starting with shares of Kingdom Holding Company (KHC), Alwaleed’s regional vehicle for investments in which he owns a 95 per cent stake, they dropped ten per cent approximately, following Bin Talal’s arrest.

That happened during early trading on Tadawul, Saudi’s stock market, in which investors were stunned to hear that the previously untouchable prince was now detained and charged with corruption.

As if they realized that this could only be short-lived, shares of KHC on Tadawul bounced back to close at 7.6 per cent down. Kingdom Holding is worth approximately $10bn on Tadawul, according to Bloomberg.

The bourse itself Tadawul was down two per cent early on, a big drop for any index, last Sunday, however, when the shock waves subsided a bit, it finished with its head above water, barely.

Read: Saudi’s crackdown on corruption; remaking of Kingdom

Saudi’s preemptive strike on corruption is an attempt to consolidate power

What to expect

There is no doubt that investors are now busy finding which international holdings belong to those arrested and consider divesting, knowing that close to 15 people were detained, but that would be a mistake, according to Chairman of Oil & Gas expert advisors, Petrie Partners and Tom Petrie, who told Bloomberg this morning: “This might give pause to investors but they also would want to see that the Crown Prince has clearly consolidated his power in the kingdom.”

“Once consolidated, the idea is that there won’t be too many more surprises coming over. Power gets respect, lack of it doesn’t.”

One of these investment concerns might be the expected IPO of five per cent shares of Saudi Aramco, worth $100bn, on international markets and Tadawul.

Petrie said that the Aramco IPO sale would progress, but differently than the one announced.

“It wouldn’t be likely selling the shares entirely to the public, but with foreign countries like China showing interest in buying outright equity, it would be a hybrid IPO,” he said

Bloomberg said on Sunday that Alwaleed bought in September a 16.2 per cent stake in Banque Saudi Fransi from Credit Agricole SA, in a deal valued at $1.54bn.

Saudi Fransi shares fell as much as 2.8 per cent before closing one per cent higher. The benchmark Tadawul All Share Index erased losses to close up 0.3 per cent.

As for the Dubai Financial market, it stayed put and unchanged by the events so far.