RIYADH (Reuters) – Saudi macroeconomic indicators are positive despite a sharp correction that hit the local stock exchange recently after a three-year rally, Finance Minister Ibrahim al-Assaf said on Saturday.
“All (macroeconomic) factors encourage investment in the kingdom in general, whether directly or in the financial market,” Assaf told reporters.
The two-week correction slashed capitalization of the Arab world’s largest bourse by more than 30 percent. The Saudi government holds nearly 40 percent of the bourse’s total capitalization through some of the top listed firms.
“Macroeconomic indicators are good in general, growth is good, and compared to other countries, it is excellent … We all know there was a budget surplus last year and we expect another surplus this year,” he said.
The kingdom posted a budget surplus of some 214 billion riyals ($57 billion) last year and has a conservative forecast of a 55 billion riyal surplus in 2006.
“The other aspect is the monetary policy, which achieved stability in prices and in the exchange rate of the Saudi riyal,” he added.
Assaf declined to say when measures promised this week by his ministry to bolster the bourse would be implemented, saying only they were being dealt with urgently.
Shares rebounded after a ministry statement promised measures to support the market. It cited only letting non-Gulf residents invest directly in the bourse and splitting nominal value of shares.
Asked if the correction would prompt authorities to implement earlier promises to set up a secondary market for illiquid stocks and to let independent firms venture in the brokerage activity — now controlled by banks — Assaf said:
“We hope to take decisions urgently. Before this correction, there were some issues on the table to support the financial market,” he said, declining to elaborate.
The Saudi bourse had soared more than 620 percent before the correction, in a three-year rally fueled by record oil receipts, higher wages for public sector and improved macroeconomic prospects.
Assaf said letting foreign residents invest directly in the bourse, instead of only through mutual funds, would require special regulation.
“There will be measures against hot money … We don’t want quick entries and exits of funds to the bourse,” Assaf said.