Foreigners Sell Net $1.1 Billion of Saudi Stocks as Journalist Disappearance Rattles Investors

October 21, 2018 Updated: October 21, 2018

DUBAI—Foreigners sold a net 4.01 billion riyals ($1.07 billion) in Saudi stocks in the week ending Oct. 18, exchange data showed on Oct. 21—one of the biggest selloffs since the market opened to direct foreign buying in mid-2015.

The selloff came during a week when investors were rattled by Saudi Arabia’s deteriorating relations with foreign governments following the disappearance of journalist Jamal Khashoggi. Riyadh said on Oct. 20 that Khashoggi died in a fight inside its Istanbul consulate.

A breakdown of the exchange data showed foreigners sold 5 billion riyals worth of stocks and bought 991.3 million worth.

“The market started to price in a fundamentally different relationship between Saudi Arabia and the U.S.,” said Jaap Meijer, head of equity research, at Arqaam Capital.

“We believe the U.S. will keep Saudi Arabia as its close ally given (amongst other things) the importance of the kingdom in the Middle East region and being the producer of 10 percent of the world oil supply.”

The stock exchange data also showed Saudi individual investors such as retail investors and high net worth individuals sold a net 3.4 billion riyals worth of stocks during the week, however, Saudi institutions bought a net 7.8 billion riyals worth of stocks. Investors from other Gulf countries were also net sellers.

Market analysts told Reuters last week that state-linked funds appeared to have mounted an operation to support the stock market after heavy foreign selling.

The Saudi stock market is down about 4 percent since Khashoggi disappeared on Oct 2. The market had already started to weaken before the incident as foreign funds slowed their buying after MSCI’s announcement in June that the kingdom will be included in its global emerging market benchmark next year.

The Saudi index closed up 0.2 percent on Oct. 21 after falling as much as 3.5 percent earlier in the session.

Saudi Arabia’s foreign debt has also been pressured, with yields rising across the country’s dollar bond curve.

By Saeed Azhar & Davide Barbuscia

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