Saudi Prince Alwaleed bin Talal (Image credit: AFP/Getty Images via @daylife)
Did a Saudi prince, apparently eager to save face, publicly contradict his King on one of his signature financial initiatives? That seems to be the case given the latest remarks from Saudi Prince Alwaleed, who is threatening to sue Forbes in London over my article in Forbes that raised questions about his net worth. (Forbes, by the way, has yet to be served with a lawsuit.)
A recent statement from
In my article about Prince Alwaleed that Forbes published in March, we quote a former employee of Alwaleed’s, who describes the Saudi stock market as follows: “The players are not many. They come in with big funds, and they buy from each other. There are no casinos. It’s the gambling site of the Saudis.”
And now a recent expose by Institutional Investor backs up my source. It shows how the Saudi stock market is the largest in the Gulf Cooperation Council, with a total market capitalization of roughly $380 billion from 150 listed companies. However, it is not open to direct foreign investment. Retail investors -- Saudis only -- dominate the trading. They account for 95% of trades, Institutional Investor says – which provides liquidity, but little depth. “Manipulation is a real problem,” the Institutional Investor article concluded, citing a 2012 order by Saudi King Abdullah to crackdown on manipulation as a key example. There is talk, according to the article, that the Saudi market may indeed open itself to direct investment by foreigners.
In April 2012, King Abdullah called for a halt to Saudi stock market manipulation, according to Reuters. As Reuters wrote:
“King Abdullah has ordered a crackdown on manipulation of Saudi Arabia’s booming stock market, insisting action should be taken if necessary against improper trading by members of the royal family, the daily Alsharq newspaper reported.”
Reuters went on to say that the King, in a message to the chairman of the Saudi Capital Market Authority, said that trading rules should apply even to royals; there are thousands of members of the Saudi royal family.
So there you have it: The King of Saudi Arabia was upset with market manipulation in his country. A nephew, Prince Alwaleed, now takes issue with the fact that someone in a Forbes article mentions the existence of Saudi market manipulation. The views of King Abdullah seem closer to the views of the former Alwaleed executive than the Prince's.
Who’s right?
Forbes has not accused Prince Alwaleed or Kingdom Holding of market manipulation. Our article simply raised questions about some rather unusual movement in the company’s stock price that happened to coincide with the annual Forbes Billionaires’ List and explained why it considered the Prince's own calculation of his own wealth exaggerated. Kingdom Holding Chief Financial Officer Shadi Sanbar responded to the questions raised by saying: “No one can rationalize any short-term fluctuations in the share price or the market directions.”
Just last week the stock markets of two neighboring countries – Qatar and the U.A.E. – were moved up a notch in ranking from frontier economy to emerging market status by MSCI, a New York-based index provider. Saudi Arabia, meanwhile, remains a notch lower at frontier market status. The reasons, said a Saudi market observer who did not wish to be identified, are many, including that Saudi Arabia does not have derivatives, foreign ownership is not direct, and that there are issues with how companies make disclosures. In essence, this observer said, the Saudi market needs to grow up to become a global best-in-class market.
Perhaps Prince Alwaleed should listen to his uncle the King before condemning Forbes for quoting someone raising the very same concerns about the Saudi exchange as His Royal Highness King Abdullah.
Follow me on Twitter at @KerryDolan
