News that Saudi Arabia plans to part privatise its stock exchange has more than a touch of piquancy. It would open up - to a still unspecified degree - a closed but appetising market awash in liquidity. On the other hand, that market is currently in free fall. Oil prices at $70 and more per barrel have created a potentially threatening bubble and the Saudi authorities will need to move faster than their customary pace to limit the fallout.
Markets across the Gulf have been on a liquidity-driven, increasingly speculative spree for more than two years. The main Saudi index doubled in each of the years 2004 and 2005, but the kingdom's listed companies have now lost nearly half their combined capitalisation from the market's peak, or close to $400bn (£215bn). That is no abstract figure. The number of Saudis sucked into this giddy new world of investment has rocketed to close to half the native-born population. An initial public offering in a petrochemical company last December drew nearly 6m people. An absolutist monarchy backed by a theocratic religious establishment has taken an enormous risk in encouraging their subjects to pursue riches rather than political and social reform, to being punters rather than voters.
