DUBAI: Saudi Arabia's index made its largest gain in more than two years on Saturday, easing away from the previous session's 22-month low after the country's finance minister sought to reassure nervous investors.
The benchmark climbed 7.3 percent to 5,709 points, its largest gain since Nov. 29, 2008.
The index plunged 15 percent last week as panicking investors dumped shares on fears Saudi Arabia would be hit by unrest following recent deadly protests in neighbouring Oman and Bahrain. These demonstrations shattered assumptions the Gulf Arab region's oil wealth would insulate it from wider political instability in the Middle East.
After market hours, Saudi Arabia's interior ministry forbid all demonstrations and marches.
"There should be a healthy rebound as investors get back into the market gradually," says Hesham Tuffaha, Bakheet Investment Group head of research. "It will take about two weeks for the market to get back to the level of before the crash."
Saudi Arabia's bourse is the largest in the Gulf, so Saturday's gains should also lift other regional benchmarks as they resume trading on Sunday, Tuffaha said.
Finance minister Ibrahim Alassaf said the country's economy was in an "excellent" shape and a rise in oil prices would boost its strong financial position.
"It is obvious the market was looking for an official statement over the last couple of days and today's rally is attributed to Dr. Alassaf's comments," said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh.
Petrochemicals stocks were among the biggest gainers. Saudi Basic Industries Corp (SABIC) added 9.1 percent and Rabigh Refining and Petrochemical Co rose 9.8 percent.
Oil hit a 29-month high on Friday, likely boosting petrochemicals earnings, with petrochemical product prices closely tied to those of crude.
Banks stocks also rose. Al-Rajhi Bank climbed 7.6 percent and Samba Financial Group added 9.8 percent.
"Investors had two days over the weekend to re-focus on company fundamentals," said Bakheet's Tuffaha."
Yet some local investors may remain nervous ahead of a planned March 11 protest in the kingdom to demand an elected ruler, greater freedom for women and release of political prisoners.
Saudi's Shia community has long complained of discrimination and most live in the kingdom's oil-producing Eastern Province, near Shia majority Bahrain, raising the spectre of wider sectarian strife, although Saturday's share gains show many investors now believe these worries were exaggerated, traders said.
"Everyone is looking towards the March 11 protest now," said a Riyadh-based trader who asked not to be identified.
"Saudi Arabia is relatively safe and I don't think we would see anything of the extent of what has been happening in North Africa. There will be zero tolerance from the Saudi authorities and the ruling family has the support of the US
"International investors have been net buyers in the previous few sessions - the long-term, value players are taking positions."
Saudi Shia held two small protests on Friday, demanding the release of a cleric and other prisoners. More than 100 protesters marched through the city of Hofuf.
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