Saudi stocks drop as Pompeo lands in Riyadh amid Khashoggi probe

Saudi Arabian stocks retreated as US Secretary of State Michael Pompeo arrived in the kingdom to meet with King Salman bin Abdulaziz over the disappearance of writer Jamal Khashoggi in Turkey.

The Tadawul All Share Index declined 1.1% as of 11:15 in Riyadh, paring a slide of as much as 4% in the first six minutes of trading. Lenders Al Rajhi Bank and National Commercial Bank contributed the most to the drop on a weighted basis, falling at least 2.1%. The gauge jumped 4.1% on Monday amid speculation that government-related funds were boosting the securities.

CNN reported the kingdom is preparing a report saying Khashoggi died as the result of an interrogation that went wrong, and that the operation was carried out without clearance. Saudi Arabia has denied accusations that it murdered the columnist and has begun an internal investigation into his fate.

• READ: WATCH: How would Saudi Arabia retaliate if US imposes sanctions?

Investors are “in wait and see mode” pending the investigation’s conclusion and any outcome of Pompeo’s visit, said Jameel Ahmad, head of currency strategy and market research at foreign exchange brokerage FXTM in Cyprus.

Trading volume of stocks on the main Saudi index was more than twice the 30-day average . The yield on Saudi Arabia’s $5bn debt due 2028 dropped four basis points to 4.47%.

The tension between Saudi Arabia and the US has raised concern about whether the country can lure foreign investors at a time it’s reforming financial markets and attempting to diversify the economy away from oil. The kingdom won inclusion in FTSE Russell and MSCI Inc indexes for emerging markets earlier this year, with billions of dollars in flows from passive investors expected starting in 2019.

“It already appears that the outline of a potential face-saving deal is emerging” on the Khashoggi probe, Michael Every, the head of Asia financial markets research at Rabobank in Hong Kong, wrote in a note.

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