RIYADH, May 10: With the Saudi bourse undergoing a major readjustment, the kingdom is contemplating an initial public offering of its stock exchange, during the next few months. The kingdom plans to sell a majority stake to investors, said Abdullah al-Suweilmy, the exchange’s general manager.

By value the Saudi market is the largest in the Middle East.

The move to make an IPO is being regarded here as an attempt by the authorities to rekindle demand for the country’s shares. From a peak of 20,000 plus, attained on February 25 this year, the local index TASI has almost lost 50 per cent value and is currently hovering between 10,000 and 11,000. In the process with hundreds of billions of dollars been wiped off, many here say, leaving behind a major social catastrophe.

Saudi Arabia later also allowed foreigners in the market, yet the move has also so far failed to stem the rot. Some analysts here now say, the index would stabilise at round 8,000 - some 40 per cent of its peak value late February this year.

Saudi Arabia in the meantime, is also planning to build a financial district near Riyadh to attract international banks and brokerages as it seeks to develop its capital markets and attract more foreign investment.

The new district, occupying a 0.6-square-mile plot of land north of Riyadh, will be known as the King Abdullah Financial District, Jammaz al-Suhaimi, chairman of the Capital Markets Authority, said in a speech on Tuesday in the city.

The district would become the headquarters of the CMA, the stock exchange and the preferred headquarters for banks, financial institutions, insurers and law firms, al-Suhaimi said. “The development is the largest of its kind in the world.”

Plans for the financial centre come as oil prices have almost quadrupled the last four years, creating a boom to the oil producing Saudi economy that pumps about a quarter of the world’s oil. Saudi banks posted higher 2005 profit as more oil revenue was invested locally, boosting the financial services industry.

Major international banks and financial consultancies are making their presence felt in the Saudi and the regional market. Deutsche Bank AG. Europe’s largest securities firm opened its first branch in the kingdom earlier this month, HSBC, Europe’s biggest bank by market value also plans to open an investment banking unit here. Besides Citigroup Inv and BNP Paribas are also seeking presence in the market to cater to the needs of the wealthy individuals.

National Bank of Pakistan and the State bank of India are also expected to start banking activity in Saudi Arabia soon. The Saudi government has granted licenses to both the banks simultaneously, to establish branches in the kingdom.

Other Gulf states including Qatar, Bahrain and Dubai in the United Arab Emirates are also planning to develop financial centres in a bid to attract foreign financial institutions in the region. Wealth management is becoming a major business throughout the region.