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Saudi and regional unrest

As soon as it became clear that political protests in Tunisia and Egypt were spreading around the Middle East, investors started casting a nervous glance towards Saudi Arabia.

"The biggest risk to the market is the possibility of political unrest reaching Saudi Arabia," says Joe Kawkabani, chief investment officer for MENA equity at Franklin Templeton Investments in Dubai. But his fears – from the perspective of investor stability – haven’t been realized. Pro-democracy campaigners announced intentions to protest on social media such as Facebook, attracting thousands of followers, but far fewer turned up for protests on the ground. Subsequent attempts have attracted fewer and fewer people. The government tightened security, while – crucially – religious scholars issued statements branding protests in the country as unIslamic and therefore illegal. "It’s important to note the big role the army and clergy play in the country," Kawkabani says. "When the government, army and clergy are aligned, it’s very hard to implement change." Behind the scenes, King Abdullah also held meetings with tribal chiefs, many of whom subsequently pledged allegiance.

To cement all this, on March 18 the king announced a series of measures designed to head off any dissatisfaction before it got going.