UPDATE 2-Billionaire Prince Alwaleed talks up Saudi stocks

Wed Mar 9, 2011 9:14am EST

* Stock market fall not justified, Prince Alwaleed says

* Saudi economy is in "very strong shape"

* May invest further $133 million in Saudi stock market (Adds Alwaleed, analyst comments, background)

By Ulf Laessing

RIYADH, March 9 (Reuters) - Saudi billionaire Prince Alwaleed bin Talal threw his weight behind Saudi stocks on Wednesday, saying he would invest 1 billion riyals ($267 million) in a market pummelled by unrest in the Arab world.

Prince Alwaleed, a nephew of Saudi Arabia's King Abdullah and a prominent investor in Citigroup (C.N), said at a press conference that he had invested more than 500 million riyals in banks, petrochemicals, telecoms, industrial and consumer stocks, and was ready to spend a similar amount in the future.

"The stock market fall is not justified," he told reporters, adding that the economy of the world's top oil exporter was healthy.

"The Saudi economy is very strong, and the bourse is in a strong position," he told reporters called to a news conference.

"Saudi stocks are cheap, and there are big opportunities."

Some investors remain nervous ahead of a planned protest on Friday, March 11, despite the king's plan to spend an estimated $37 billion to ease social tensions in the OPEC member, where over 10 percent of the 19 million locals are unemployed.

Just 90 minutes before Alwaleed spoke, Saudi Foreign Minister Prince Saud al-Faisal, another nephew of the king, took the podium to tell reporters that the best way to bring about change in the country was through dialogue.

"The principle of dialogue, I believe, is the best way to address the issues facing society," Faisal said, adding that protests in the conservative kingdom were forbidden.

Saudi stocks .TASI hit a 22-month low on March 2, falling nearly 20 percent in a two-week span as fears of domestic unrest in the conservative kingdom triggered panic selling by investors.

It has since recovered 14.8 percent, helped by last Saturday's comments from Saudi Finance Minister Ibrahim Alassaf that the economy was in "excellent" shape and a rise in oil prices would help strengthen the kingdom's economic and financial position.

"This follows on from the minister's comments, and you could look at these (Prince Alwaleed's) statements as a policy response to concerns about possible unrest in Saudi Arabia. It's a confidence-boosting measure for retail investors," said Ibrahim Masood, senior investment officer at Mashreq Bank.

Public revolts against autocratic regimes and economic hardships have swept through the Arab world over the past two months, unseating Egyptian and Tunisian leaders and sparking insurrection in Libya.

Although Saudi Arabia's huge oil wealth has provided a high standard of living compared with many of its neighbours, rumblings of discontent from the Shi'ite minority last week have alarmed Riyadh and investors who once thought that relative prosperity would be insulation against the spreading unrest.

Retail investors account for around 85 percent of Saudi Arabia's market turnover.

Foreign investors, through swaps agreements, have an estimated $1.5 billion invested in Saudi shares as of February, said Ankit Gupta, senior research analyst at Securities & Investment Co (SICO) in Bahrain.

Oil prices, which rose above the $100 per barrel mark on the regional unrest, are expected to help the kingdom and other Gulf crude exporters to finance the increased social spending in the short term.

Prince Alwaleed also said his company, Kingdom Holding 4280.SE, was still in talks with Kuwait's Zain (ZAIN.KW) to buy the telecom's Saudi assets. [ID:nWEA7543] (Additional reporting by Matt Smith, writing by Shaheen Pasha; Editing by Will Waterman)