“There’s the added concern here that the political uncertainty leads to a period of capital outflows that forces SAMA to burn through its foreign-exchange reserves at a faster pace,” he said, referring to the Saudi Arabian Monetary Authority, as the central bank is known.
The arrests have prompted investors from within the region to sell.
The central bank “has strong systems in place to track flows and excellent relationships with major banks globally so any assets moved offshore could be frozen and returned if from corruption.” Some of the country’s wealthy are worried that shifting assets outside Saudi Arabia may draw suspicion and are instead focusing on their GCC holdings, two people with knowledge of the matter said.
Saudi Arabia is also in the midst of implementing a transformation aimed at weaning the economy off oil.
“There is a growing perception that governance is becoming increasingly arbitrary or at least less rule-based.” The central bank asked lenders in the kingdom to freeze the accounts of dozens of individuals who aren’t under arrest, as well as the assets of those being detained, people familiar with the matter said.
In addition, the United Arab Emirates central bank asked financial institutions to provide information on the accounts of 19 Saudi citizens, people familiar with the matter said on Thursday.
The government plans to create the world’s largest sovereign fund and sell hundreds of state assets, including Saudi Arabian Oil, as well as stakes in the stock exchange, soccer teams and flour mills.
Concerns of a renewed confrontation between Saudi Arabia and Iran is also prompting investors to dump stocks in the region.
They now find themselves on the run in the face of a campaign that has targeted some of the kingdom’s most prominent princes, billionaires and officials.
“There is no doubt that many offshore investors are reassessing their view of the Gulf as a stable and predictable place to do business,” said Philippe Dauba-Pantanacce, a London-based senior economist and geopolitical strategist at Standard Chartered Bank.
Lebanese Prime Minister Saad Hariri resigned on Saturday, announcing his decision from Saudi Arabia and blaming Iran and the Hezbollah militants it backs for the his decision.