Plucky investors have moved into the vacuum caused by a sell-off in regional markets in response to Arab unrest.
Markets are recovering from negative reaction triggered by the killing of protesters in Bahrain on February 14th. The prospect of a potential bailout of Bahrain and Oman by the Gulf Cooperation Council Marshall Plan has helped to lift sentiment. But one question looms: how will markets react to Saudi Arabia’s planned Day of Rage on March 11?
Saudi Arabia is currently leading the recovery in regional markets, but the oil-rich kingdom is also at the heart of future regional concerns, with demonstrations planned for the next two Fridays.
The Tadawul, after dropping 20 per cent, has recovered 14 per cent this week (see Bloomberg screenshot below) as investors bet that the concerns over regional unrest had been oversold.
Short term, the prospect of a profound political impact seems limited.
The government and the clerics are closing ranks against the demonstrations, amid promises of $36bn in state largesse. Behind the scenes, the secret police are stepping up their operations.
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