Saudi market may be firm as crown prince consolidates power

DUBAI - 5 November 2017: Saudi Arabia’s stock market may be firm on Sunday after Crown Prince Mohammed bin Salman moved to consolidate his power and crack down on corruption with a cabinet reshuffle and string of detentions of prominent figures.

Late on Saturday, King Salman announced the creation of a new anti-corruption committee chaired by Prince Mohammed; Saudi-owned Al Arabiya television said the body had detained 11 princes, four current ministers and tens of former ministers.

A senior Saudi official, who declined to be identified under briefing rules, said billionaire Prince Alwaleed bin Talal, who owns investment firm Kingdom Holding, and former finance minister Ibrahim al-Assaf were among those detained.

Prince Miteb bin Abdullah was replaced as minister of the National Guard by Khaled bin Ayyaf, while Economy Minister Adel Fakieh was removed in favour of his deputy Mohammed al-Tuwaijri, according to a royal decree carried by state-run media.

The reshuffle helped to consolidate Prince Mohammed’s control of the kingdom’s security institutions, which had long been headed by separate powerful branches of the ruling family.

The news could hurt several individual stocks including Kingdom and Banque Saudi Fransi; in September, Kingdom completed the purchase of a 16.2 percent stake in Saudi Fransi.

It could also worry some foreign investors if they see the sudden detentions as a sign of instability. A week ago, hundreds of foreign businessmen and officials attended a massive investment conference in Riyadh, at which the prospect of a purge was not publicly discussed.

However, local investors may react positively to the idea of Prince Mohammed increasing his power and reducing uncertainty about his authority. Economic reforms such as privatisation and development projects could potentially now move faster.

In June, the Saudi stock market jumped 7 percent in the two days after Prince Mohammed was promoted to his current role from deputy crown prince, replacing his cousin Prince Mohammed bin Nayef.

At that time, stocks of commanies seen as key to Prince Mohammed’s economic development plans surged, including National Commercial Bank, the biggest lender, and miner Ma‘aden .

Also positive for Gulf stock markets on Sunday is the fact that Brent oil closed at a two-year high of $62.07 on Friday, while global stocks were firm.