JPM JP Morgan Chase and Co

By Rory Jones in Dubai and Benoit Faucon in London 

Saudi Arabia's dream of becoming an investment hub in the desert is unraveling.

JPMorgan Chase & Co. Chief Executive James Dimon, Sunday became the latest prominent executive to back out of the kingdom's premier business conference amid questions about the disappearance of journalist Jamal Khashoggi. Mr. Dimon had been a featured speaker, and his bank has longstanding ties to Saudi Arabia and is advising it on deals.

Mr. Dimon joins a host of Western executives and advisers who pulled out of Riyadh's conference following allegations that the Saudi government ordered Mr. Khashoggi's killing. Ford Motor Co. Chairman Bill Ford and Uber Technologies Inc. Chief Executive Dara Khosrowshahi, whose company is partly owned by Saudi Arabia, won't attend the conference.

A spokesman for the conference on Friday called the cancellations disappointing but said the Saudis were still looking forward to holding the conference.

Saudi Arabian stocks tumbled Sunday as investors' confidence was shaken in the 33-year-old Crown Prince Mohammed bin Salman's ability to deliver on pledges to attract foreign investment amid signs Mr. Khashoggi's case could spook businesses and risked serious damage to Saudi relations with the U.S. and other countries.

President Donald Trump promised "severe punishment" if the allegations about Mr. Khashoggi prove true.

The Saudi government says it had nothing to do with Mr. Khashoggi's disappearance and is working with the Turkish government to investigate what happened to him.

The Riyadh-based Saudi Stock Exchange's benchmark Tadawul All Share Index closed 3.5% lower, after falling nearly 7% at one point in the session.

Last week, as the case's repercussions came into focus, foreign investors were net sellers of $160 million worth of shares on the Tadawul, according to the exchanges data. That compared with net buying of roughly the same amount in the previous week, the data showed.

Before Mr. Khashoggi's disappearance, Prince Mohammed's most ambitious plan, the initial public offering of the state oil company, had stalled. Saudi talks with companies including Alphabet Inc.'s Google, Warner Bros. and Richard Branson's space firms haven't resulted in deals.

More broadly, Saudi finance ministry officials say the government has created a level playing field for businesses, supplanting an environment where deals depended on political and royal connections. The kingdom is expecting tens of billions of dollars in foreign cash flow from passive investors now that its stock market has gained approval from multiple indexes.

"By any measure, progress over the past year has been positive. New investments have been agreed at home and abroad in a number of sectors, including entertainment, technology, infrastructure, renewable energy and tourism," said a spokesman for the Saudi sovereign-wealth fund.

To be sure, some Western executives are waiting before disrupting their ties with Saudi Arabia. Some are waiting for a signal from Treasury Secretary Steven Mnuchin, who so far remains committed to attending the conference in Riyadh and maintaining Saudi ties, U.S. officials said.

Credit Suisse Group AG CEO Tidjane Thiam was planning as of Sunday to attend the Riyadh investment conference that begins Oct. 23, according to people familiar with the matter. Goldman Sachs plans to send two top executives, Dina Powell and Sheila Patel, other people familiar with the matter said.

A Western banking executive said bankers feared losing business in Saudi Arabia if they don't attend the conference.

In April 2016, Prince Mohammed announced a plan to revamp his kingdom's society and economy dubbed Vision 2030. The ruler allowed women to drive for the first time, opened the first new cinema in over 30 years, began construction on a futuristic new city called Neom and promised a more moderate form of Islam.

The young leader has promised aggressive policies to further investment, improve the workforce and create the legal and regulatory climate to diversify and develop his country's oil-dependent economy.

However, Saudi Arabia has had trouble sealing the types of business deals that the prince wants.

Some of his actions have worried the business community. He has blockaded Qatar, rounded up Saudi businessmen at the Ritz-Carlton Hotel and severed diplomatic ties with Canada over a tweet.

Mr. Branson, the British entrepreneur, last week said he would give up two directorships related to Saudi tourism projects over Mr. Khashoggi's disappearance and also would suspend talks with Saudi Arabia's sovereign-wealth fund about its proposed $1 billion investment in his Virgin Orbit and Virgin Galactic space ventures.

Saudi government talks with Alphabet Inc.'s Google and Amazon Inc. to build data centers also haven't progressed to an agreement. The projects would have helped bolster the development of the technology sector in Saudi Arabia, a goal Prince Mohammed has championed. Amazon and Google didn't respond to requests for comment.

Softbank Group Corp. and Saudi Arabia are scaling down and rethinking a solar-generation and manufacturing plan they announced in March as the world's biggest-ever renewable project, worth $200 billion. SoftBank and Saudi Arabia both say the plan will go forward eventually.

After the first cinema opened to great publicity this summer, only one more has opened, and not every agreement under discussion with U.S.-based AMC Entertainment Holding Inc. has been finalized, people familiar with the negotiations said. In April, Saudi Arabia and AMC promised up to 40 theaters over the next five years; only one is operating, in Riyadh's nearly empty financial district. A person close to the cinema talks said the theater plan was still on track as originally conceived.

Saudi Arabia has been more successful deploying its own money around the world, though even there its track record is mixed.

A Saudi commitment to private-equity firm Blackstone Group LP of up to $20 billion for a U.S. infrastructure fund -- lauded by President Donald Trump -- has gotten off to a slow start. Blackstone raised an initial $5 billion, half of which is set to come from the Saudis' Public Investment Fund. The infrastructure fund has yet to announce its first deal.

Blackstone didn't immediately respond to a request for comment.

In total, the Saudis' Public Investment Fund has invested or committed roughly $100 billion to investments overseas in firms such as Tesla Inc. and Uber. As the biggest contributor to SoftBank's $100 billion Vision Fund, Saudi Arabia is among the largest global investors in the technology industry. The Saudis have expressed hope that those investments will encourage companies to set up in Saudi Arabia.

A person close to the SoftBank Vision Fund said advisers are watching closely not just for evidence of a crime in Mr. Khashoggi's case, but also for any reactions from portfolio companies. A question for the Vision Fund is whether deals get derailed because of Saudi Arabia's close affiliation with the fund, the person said.

--Jenny Strasburg and Summer Said in London and Emily Glazer in Los Angeles and Liz Hoffman in New York contributed to this article.

Write to Rory Jones at rory.jones@wsj.com and Benoit Faucon at benoit.faucon@wsj.com

(END) Dow Jones Newswires

October 14, 2018 22:47 ET (02:47 GMT)

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