May 17, 2006	Wednesday	Rabi-us-Sani 18, 1427

RIYADH, May 16: The Saudi government has announced setting up of special fund to protect small investors from risk involved in trading at the Saudi stock exchange. The special fund is basically meant for the low income Saudis who want to trade on the Saudi stock market. It will protect their investment from the vagaries of the stock market. It is also the first direct government interference to boost the flagging local stock market.

While making the announcement Saudi King Abdullah said the fund would be limited to those with a maximum investment of 500,000 riyals ($133,300).

With Saudi stock exchanges passing through a major adjustment, the crash in its wake had created major financial difficulties for common Saudi investors. A large number of small investors had been involved in shares trading, which has been passing gaining strength year after year for the last five years. It peaked on February 25 when the Saudi Tadawul All Share Index (TASI) crossed the 20,000-mark. However, ever since then it has been passing through a rough period. Currently it is trading below 12,000-mark, although at point last week, it even went down below the 10,000-mark.

The crash had affected a large number of Saudi families, who in view of the tremendous growth of the TASI over the last few years had put virtually everything at stake in the stock market. These people, mostly of the low income group, had to pay a very price for their indulgence in un-chartered waters.

The decision of the Saudi king is thus aimed at salvaging and helping the low income investors. Analysts feel this move would also give a boost to the falling stock market, as many low income and small investors would flock back into the market with renewed vigour and enthusiasm, as the state would cover their losses.

The kind added: “This fund ... will be set by the state for people with limited income and those who wish to invest more than 500,000 (riyals) will not be allowed.”

According to king Abdullah, small investors “will be able to buy and sell for two years, if they win then this is their luck with God’s will and if they lose then their capital is preserved with us.”