Saudi purge evokes pragmatism and fear

The arrests of as many as 500 people in Saudi Arabia as part of an anti-corruption initiative have divided investor opinion.

The detentions, which some are calling a purge, are seen as an effort to consolidate the power of crown prince Mohammed bin Salman. The crown prince is the leader of the newly formed Saudi Anti-Corruption Committee, which has detained princes, politicians and businessmen in an effort, it says, “to root out corruption”.

“This is the latest act of concentration of power in Saudi,” said Hasnain Malik, global head of equity research at Exotix Capital. “As unprecedented and controversial as it may be, this centralisation might also be a necessary condition for pushing the austerity and transformation agenda, the benefits of which very few investors are pricing in.”

The UAE central bank has reportedly asked local institutions to provide information on the accounts Saudi citizens caught up in the detentions. The Saudi authorities say they want to confiscate the assets of detained citizens as part of an effort to recover what they say are misappropriated funds.

Despite his optimistic view, Malik admitted that some may see the purge as “populist ruthlessness”.

The purge is reminiscent of the anti-corruption measures of Chinese president Xi Jinping, who used his assault on graft to consolidate his power.

©2017 funds global mena

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