RIYADH, (Reuters) — Prince Alwaleed bin Talal, who has made billions of dollars investing in underperforming companies, said on Sunday he spent 5 billion riyals ($1.33 billion) in the Saudi bourse this month betting a crash is over.
Alwaleed, the largest individual shareholder in Citigroup Inc., (Charts) raised his stakes in three companies, including Samba Financial Group, the kingdom’s second-largest lender by market value that Citigroup managed until 2004.
He also bought into Saudi Research & Marketing Group, a publishing company.
“Now prices are reasonable and logical,” Alwaleed, 51, told reporters in the Saudi capital, Riyadh.
Saudi Arabia’s benchmark index plummeted 52.5 percent last year, the worst performance among 81 indexes tracked by Birinyi Associates Inc., a U.S. stock market research company.
The market rose more than seven-fold in the five years up to February last year as oil prices surged, pouring cash into the world’s largest crude exporter
“We hope the bourse will not rise in a crazy fashion like in the past,” Alwaleed, a nephew of Saudi King Abdullah, said.
The prince, the world’s eighth richest man, said he was making good on a pledge he made last March 15 to spend 5 to 10 billion riyals in the bourse after the market plunged 28.9 percent in three weeks from its Feb. 25, 2006, peak.
The index surged 4.7 percent on March 15, sparking a three week rally before losing 55.1 percent of its value during the rest of the year.
Alwaleed, whose fortune has been put at $20 billion, said he increased his stake in Samba Financial from 5 percent, in Savola Group, the kingdom’s largest food-products company, from 13 percent and in National Industrialization Co. from 10 percent. He did not give details.
He and some of his companies also spent 2.1 billion riyals on a 25 percent stake in Saudi Research, which publishes newspapers such as London-based Asharq al-Awsat.
He spent an additional 5 billion riyals on real-estate projects which will later list on the Saudi bourse, he said.
“This is a vote of confidence in equity valuations in Saudi Arabia,” said Haissam Arabi, head of asset management at Dubai-based Shuaa Capital investment bank, which manages $1 billion of assets in Arab markets.
The market is trading at an average 13 times 2006 earnings, its lowest in more than 10 years, Arabi said.
The index was down 12.75 percent so far this year through Saturday, the worst performer among 7 Gulf Arab indices.
Oil prices, on which the Saudi government relies for about 75 percent of its revenue, have fallen 9.1 percent so far this year, closing at $55.50 per barrel Friday.
At 5 percent, Alwaleed’s stake in Samba was worth $90.1 million at Saturday’s closing price. The stock has declined 18.8 percent so far this year.
Shares of Savola surged 7.3 percent Sunday and National Industrialization 7.2 percent. Samba shares declined 1.2 percent.
“The market is undervalued,” said Hani Baothman, chief executive of Aayan Capital, a Riyadh-based asset manager. “By stepping into the market it could trigger an institutional move towards leading shares,” Baothman said.
The larger of the two real estate projects will be a mixed-use development north of Jeddah that will cost 50 billion riyals to complete, Alwaleed said. The smaller development, a resort near Riyadh, will cost 25 billion riyals.
Alwaleed began investing after graduating from California’s Menlo College in 1979, and a year later he received a $300,000 loan from Saudi American Bank, which was run by Citicorp, according to his biography.
The prince returned Citicorp’s confidence in 1991, investing $590 million in the bank, which needed cash as it struggled with Latin American loan losses and a collapse in U.S. real-estate prices. That stake is now worth about $10 billion.