Jeddah--  Foreigners withdrew more than SR1 billion ($267 million) from Saudi Arabia’s markets as unrest in Egypt fueled concern about the stability of the region, a top executive at Jadwa Investment Bank said.Turmoil in Egypt, which sparked a region-wide slump in stock markets, has raised risk premiums and will likely delay planned bond and equities issuances from Middle East borrowers.
"We think over SR1 billion was withdrawn through the swap agreement in the last three days of January, which reflects an increase in the risk premium foreign investors attach to this region," Paul Gamble, head of research at Riyadh-based Jadwa Investment, said in an interview.Foreign investors generally participate through swap instruments such as participatory notes in the Kingdom.
As the unrest in Egypt threatens to engulf neighboring states, there are big question marks on how investor friendly future government policy will be.The executive, however, does not see similar events unfolding in the top oil producing Gulf state.
"There are big differences in the economy of Egypt and Saudi Arabia. GDP per capita is a lot higher, unemployment is a lot lower, and subsidies are generous on many food products," Gamble said.
"We don’t see the economic similarities between the two."Bank lending in Saudi Arabia is expected to improve in 2011 as provisions for potential loan losses peak, Gamble said.
The Kingdom’s central bank governor said in January that Saudi banks had taken adequate measures against bad loans and lending would accelerate this year."The banks have done the bulk of their provisioning, they are sitting on a lot of money, with large excess reserves at central bank, and demand for funds is rising from the private sector," Gamble said.
Most Saudi banks exceeded analysts average forecast for net profit in the fourth quarter, among them HSBC affiliate SABB and Banque Saudi Fransi, part-owned by France’s Calyon.Monetary indicators also looked positive, with money supply growth accelerating as deposits grew 4.7 percent and private bank credit 4.8 percent, their highest in eighteen months.