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Tadawul behavior not matching economic boom in the Kingdom

By Mohannad Sharawi JEDDAH - A Saudi expert specialized in stock market has called on the Ministry of Finance and the Saudi Arabian Monetary Agency ( SAMA ), in addition to the local commercial banks, to restore confidence to the local stock market in light of the decline of the market value which does not meet with the firm and strong status of the Saudi economy.

Dr. Sami Bin Abdul Aziz Al Nuwaiser, an expert in financial investment, said that the local stock market is a leading indicators for any global economic especially as the Kingdom witnesses a quantum leap in different areas, not to mention that the rate of economic growth of the Kingdom amounted to around 6.5 percent in 2011 - revealing the economic boom the country lives in.

He wondered why the local stock market since the pre-collapse period in February 2006 - when the index reached its peak of 20635 points before it fell down to the current oscillation between 6500-6700 point - a dramatic decline which does not meet t the economic boom of the Kingdom.

Al Nuwaiser suggested the formation of a high commission of truth-finding which would be in charge of investigating all the real causes that lie beneath the repercussions of the Saudi stock market since 2006 until now.

He stressed that the national wealth loss that resulted in a dramatic and still unrelieved collapse was estimated at a couple trillion of Saudi riyals, which is equivalent to a gross national income of the country for more than a year.
"The commission should emphasize the following key queries: Who is the prime beneficiaries of such a tragedy and who is responsible for such a collapse?" Al Nuwaiser added.

He also noted that this tragedy or the economic disaster has had its bad impact on the loves of more than four million Saudi investors in the stock market and causes many setbacks in many families to the extent of having some investors imprisoned and caused real psychological shocks to others.

"Why did not some authorities here like the Ministry of Finance and SAMA interfere to prevent the occurrence of such a tragedy? They instead left the market wide open for citizens to invest in without any enlightening and in advance warning of the predictable decline. The strange thing is that the stock market collapse has not came out of the blue but it was anticipated between the period of 2003-2006 since the spark of the unjustified high movement of the index as early as the privatization of the STC and its IPO followed by inflation and a sudden hike in the number of investors from 12,000 to 4 million during that period. We should not ignore that there were other chief parties who played an important role in the setback and economic disaster. Those parties I would like to call them "the most important beneficiaries" are the banks. Those are the main direct parties concerned with this issue as their financial policies at that time supported and encouraged the investing in stock market by offering loans for the purpose of "overdraft investment." Those banks could also have interfered to rescue the market from more declines like in other European countries and the US where some monetary institutions and banks help restoring the stock market to its normal status.

"The second main factor behind the stock market disaster was the vague stimulation of the Saudi investors by some deluding market analysts who tried to convince those naïve investors to enter the market without giving them the minimum associated guarantees and basics of investing in such a growing market".

"According to the International Monetary Fund, the Kingdom occupies the 21st rank in the world with the largest reserves at more than SR2033 billion and witnesses a historical economy boom at all levels.

However, we can see how the stock market still lags behind this boom because of the still unresolved shaky psychological investment atmosphere and the general mood of lack of confidence. I urged all the relevant authorities not to leave the Saudi stock market - which is supposed to be the largest emerging market in the Middle East - ranked 18th among other 53 growing markets around the world," Al Nuwaiser stressed.

© The Saudi Gazette 2012