The uprising in Egypt has led to volatility in Gulf financial markets, according to a flash note issued by Banque Saudi Fransi, which advised investors to exercise caution before parking their funds in Saudi Arabia's equity and foreign exchange markets.
According to the bank note, investors -- particularly those based overseas -- should be cautious for as long as the regional political unrest continues, even though the economic implications look manageable for Saudi Arabia.
The report said that the wave of unrest in Egypt indirectly exposes Gulf oil exporters to negative investor sentiment, although there is no reason to question the stability of Gulf political regimes, nor does it seem likely that economic fundamentals will be shaken.
"The flight of foreign capital from Egypt will undeniably have a bearing on the entire Middle East; investors from across the region and beyond are invested in Egyptian equities, real estate and industrial projects," the statement said.
"Gulf oil exporters, including Saudi Arabia, have been caught in the current, with equity markets showing some weakness this week. However, Gulf oil exporters, although not insulated, are less vulnerable to any direct contagion effects," the statement said.
The report, titled, "The wake-up call: Egypt contagion looms, but manageable", said the negative investor sentiment caused by the Egypt uprising has hit Gulf equities and credit markets.
According to the bank, high oil prices and demand growth insulate Saudi Arabia from the Egypt contagion, but this uprising underscores the urgent need to address rising regional unemployment. Gulf investors are heavily involved in the Egyptian economy through investments in publicly listed firms as well as numerous private sector ventures across the real estate, construction, industry, banking and telecom sectors.
