A new investment fund is to be created through which small investors can invest on the Saudi stock market, King Abdullah announced on 16 May. The investment will be risk-free, with subscribers retaining any gains but the government covering any loss made by the fund.

Maximum subscription to the two-year vehicle will be SR 500,000 ($133,000). It is aimed at the estimated 3 million retail investors in the market, who have been hardest hit by recent reversals on the Tadawul All-Share Index (TASI), lacking the market power of the big institutional players.

‘The good thing is that this is a fund and we have always said that you need to channel retail investment in the market into institutional investment,’ says Khan Zahid, vice-president and chief economist at Riyad Bank. ‘Over the longer term, it will assist in the broader institutional development of the market. The fund will be professionally managed and, in a way, the fact that the government has to cover any losses will create an extra incentive for the managers.’

The TASI shot up in the wake of the sacking of Capital Market Authority (CMA) chairman Jammaz al-Suhaimi on 12 May and his replacement by Supreme Economic Commission secretary-general Abdulrahman al-Tuwaijri (see Cover Story). However, on 16 May the market slumped again by 9.84 per cent and fell by a further 1.76 per cent the following day.

‘People are still playing games,’ says Zahid. ‘Investors took a bet after the personnel change then took their profits a few days later.’