Al-Waleed row flares market manipulation debate

By:
Orlando Crowcroft
Published on:

Public spat with Forbes over rich list; follows new CMA appointment.

Saudi billionaire Prince Al-Waleed Bin Talal was embroiled in a public row last month after he said Forbes magazine had shaved $9.6 billion from his personal fortune in its latest ranking of the world’s wealthiest.

Al-Waleed’s Kingdom Holding Company has stated in recent weeks that the disagreement with Forbes is not about the prince being cast outside the top 10 richest, but rather about suggestions that KHC shares might have been overvalued because of manipulation on the Saudi stock exchange, the Tadawul.

The Forbes article quoted an unnamed source as saying that market manipulation was “a national sport” in Saudi Arabia. This prompted KHC chief financial officer Shadi Sanbar to issue a statement last month condemning what he said was an unsubstantiated insult to Saudi regulators and bias against Middle East investors.

Saudi billionaire Prince Al-Waleed Bin Talal has fought suggestions his holding company was overvalued due to share manipulation
Saudi billionaire Prince Al-Waleed Bin Talal has fought suggestions his holding company was overvalued due to share manipulation
Many in Saudi are reluctant to talk on the matter. But according to Mohammed Al Omran, who runs a financial consultancy in Riyadh, the publicity around the incident has underlined concerns that manipulation might be relatively easy in Saudi Arabia, where the local stock exchange is closed to foreigners and dominated by local retail investors.

Regardless of whether or not anyone connected to KHC was indeed engaged in market manipulation, Al Omran points out that the small free float of many Saudi companies – in KHC’s case only 5% is traded, with 95% held by Al-Waleed – could also makes share-price manipulation easier.

The latest disagreement comes after King Abdullah made a statement on market manipulation late last year, ordering a fresh clampdown by the Saudi Capital Markets Authority (CMA) according to local media. “This was an admission at the top level that there was a problem,” says Said Hirsh, formerly at Capital Economics and now an independent analyst.

Meanwhile, international media coverage of alleged Saudi market manipulation comes as the market could get still more attention if a long-expected opening to foreign investors happens, probably via a Chinese-style qualified foreign institutional investor scheme.

New hopes that the market would open to foreigners spiked again earlier this year with the appointment of a new CMA head, Mohammed Al Sheikh, formerly head of the local affiliate of US law firm Latham & Watkins.