While most of the global and regional markets wobbled and faltered last year, the Saudi Tadawul index remained on an upward trajectory for most of 2009. The market rose 30 per cent last year and was the second best performer in the region only to the Cairo stock index, which rose 39 per cent.

Not surprisingly, nine of the top best performing regional funds were focused on the Saudi market last year, according to Zawya Funds Monitor. Top of the list stood HSBC Saudi Petrochemicals Equity Opportunities Fund, rising 71.26 per cent in the year. Saudi Hollandi Capital's Saudi Equity Fund was a distant second rising 50.74 per cent last year, far out performing its benchmark Saudi Tadawul index. Meanwhile, Al Yusr Saudi Equity Fund, another fund run by Saudi Hollandi Capital, was third, rising 48.65 per cent in the year.

Analysts expect the Saudi market to improve on its gains in 2010 as well as economic activity picks up.

"The short-term outlook for the market is reasonably good, given firming external demand and robust government spending, which should support corporate profit growth," notes a report by Saudi-based Saudi American Bank (Samba).

In the medium term, Samba expects the market to be supported by the government's economic and financial fundamentals, and further improvements to the regulatory structure.

"Foreign involvement is also expected to increase, and this should enhance transparency and stability," say Samba, referring to the stock swap which has attracted many foreign investors to the market.

However, the Saudi bank is more cautious about the prospects for the second half for the economy. "We are less sanguine about the horizon beyond six months. There is no doubt that financial market confidence and risk appetite have strengthened, contributing to and reinforcing a further rally in asset prices."

While Saudi Arabia can do little to mitigate outside influence, it is looking to boost spending. 2010 will see Saudi Arabia roll out a 540 billion riyal budget — its largest ever — where the "needs of the national economy and global economic circumstances had been taken into consideration and would continue to strengthen sustainable development in the country despite the fall in oil prices and exports", according to Saudi King Abdullah.

This resilient spending in the face of an uncertain future should buoy the economy this year.

Justified

"Saudi Arabia's budgetary expansion and high fiscal spending is justified as the global economy tries to pick up its recovery pace," wrote John Sfakianakis, group general manager and chief economist at Banque Saudi Fransi, Riyadh, in a report. "The Saudi population is growing at a rate of more than two percent each year and is expected to rise to 29 million by 2015 and almost 32 million by 2020, according to our projections."

Egyptian investment bank EFG-Hermes expects the kingdom to register a 4.1 per cent growth next year as a result of these measures.

"We expect a notable improvement in the economy in 2010 and 2011," EFG-Hermes noted in the report. "Along with net exports making a positive contribution, we also expect to see a pickup of domestic drivers, especially as government projects announced in 2009 start to be implemented."

The writer is managing editor, Zawya.com