RIYADH, March 21: Expatriates in Saudi Arabia will be allowed to invest directly in the local stock market from next Saturday. “Pursuant to a directive by the custodian of the two holy mosques King Abdullah to allow non-Saudi residents to invest directly in the stock market and not only through funds,” a statement posted on The Capital Markets Authority (CMA) website said.

“The authority announces that this royal directive will be enforced starting Saturday.”

Up to now, foreign residents could invest in the bourse only through mutual funds. Saudi economists estimate that the expatriate community earns $35 billion a year, of which $15 billion are transferred out of the country as remittances.

The decision to allow foreigners to invest in Saudi bourses was taken last week in the wake of rapid losses incurred by the ‘Tadawel All Shar’ index of Saudi Arabia. The index plunged to 14,000 from 20,000 points at a time.

However, the orders of King Abdullah to allow expatriates in the market and the announcement by Prince Al-Waleed bin Talal of Kingdom Holdings to invest SR10bn in the local bourses have helped the market gain some confidence. It is currently trading at above 16,000 points — yet still below the peak experienced hardly two weeks ago.

This was despite the fact that no large funds were recently withdrawn from the Saudi stock market, causing it to devalue, according to Finance Minister Ibrahim al Assaf.

Speaking earlier in the week, after signing guarantees for a number of local banks that funded small and medium enterprises, the finance minister said economic indicators were positive despite the recent downward correction of the stock market and added that all indicators encouraged investment in Saudi Arabia, whether directly or through the financial market.

“Growth is good, even excellent, compared to other countries. We had a budget surplus last year and expect the same this year. Monetary policy has led to stable prices and a stable exchange rate for the Saudi riyal,” he remarked.

Last year, Saudi Arabia’s surplus was approximately SR214 billion ($57 billion). Conservative projections for 2006 estimate the surplus to be almost $55 billion.

While the bourses throughout the Gulf were passing through a deep correction phase last week, many investors, especially the smaller ones, were finding it difficult to sustain the ordeal.

Some six million Saudis — roughly a third of the native population of just under 17 million — are involved, directly or indirectly, in stock-buying. And tens of thousands of expatriates also buy stocks through bank-managed funds.