However, beneath the glowing headline figures lurk hidden dangers, warns Said al-Sheikh, chief economist at the Jeddah-based The National Commercial Bank. 'There's a real danger in speculation driving the market up,' he says. 'As it is, there is now a good opportunity for the government to sell some of its shares because it would get good prices and help stabilise the market by satisfying some of the excess demand for shares. That would ward off the danger of a severe correction later on.' Market capitalisation is now about SR 330,000 million. Direct government stakes represent about 32 per cent of the total, and only an estimated 51 per cent of all shares can be termed free floating.

Momentous changes are due to both the structure and composition of the market. The new capital market law is expected in the first quarter of 2003. It will create a new securities and exchange commission, new grievance procedures and a more streamlined market. It follows the creation last autumn of a new real-time, electronic trading floor, Tadawul, which allows the online trading of shares.

Following the publication of a 2001 balance sheet in May, Saudi Telecom is expected to offer some 15 per cent of its shares on the stock market in late September, increasing the market capitalisation by about SR 12,000 million. In addition, Saudi Electricity Company (SEC) in April published its first balance sheet following its consolidation two years earlier. The publication clears one of the last obstacles to the trading of identical SEC shares on the market to replace the shares of its 11 former component companies.