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| Arabia |
| Saudis slam govt, bank role in bourse crash |
| 2006-05-20 |
| JEDDAH, Saudi Arabia • Hundreds of Saudis turned a forum into a rare public debate of the role of the government, banks and royal court members in a bourse crash, which has hit hundreds of thousands of small investors. The privately organised forum in the Red Sea port of Jeddah, widely seen as the most liberal city in the conservative kingdom, offered a rare opportunity for a public outpouring of grief and anger after the crash, which wiped off half of the value of the Arab world's largest bourse in 60 trading days. "I'm getting a lot of (written) questions from the public asking 'where has our money gone?'" moderator Abdullah Dahlan told the meeting which ended late on Thursday. More than 1,000 investors packed the auditorium hours before its start, a trickle compared to the estimated 4 million Saudis who trade in stocks and who suffered most from the crash. The downturn which began in late February was sparked by a power struggle between the bourse regulator and cash-laden major speculators, with retail investors – most of whom lack basic knowledge of market principles – caught in the middle. Analysts say the market had been ripe for a correction after it soared over 600 per cent in three years on the back of record oil receipts, abundant liquidity and lack of quality paper. "Our market has been manipulated," Yassine Al Jafri, a prominent economist, said, triggering noisy applause and cheers. "There are questions that beg to be asked: Why has state spending slowed? Why the weak supply of shares when you see demand growing, and 64 per cent of capitalisation is controlled by the government (through state-owned firms)," he said. The slump has dealt a blow to the government's drive to ensure a fairer sharing of wealth through investment in stocks. Participants asked why the state had not floated oil giant Aramco and why it kept stakes of 70 per cent in top listed firms. "In other countries, the state and financial institutions join efforts in times of crises. Why didn't banks give small investors a six-month reprieve on their debts? They can afford to do it, they make billions of riyals in profits," said Dahlan. The quizzing extended to members of the royal court. "I had a question on the role played by princes in the bourse, to which I reply by saying they are citizens like you, they invest in the bourse," said Dahlan. There are an estimated 6,000 to 7,000 princes in Saudi Arabia. "Another question was 'where is Prince Alwaleed (bin Talal) amid all of this?'" he added. The announcement by the billionaire prince, a well known international investor from Saudi Arabia, of plans to invest up to 10bn riyals ($2.7bn) in Saudi shares helped spark a sharp but short-lived rebound. "I think he got into the market earlier (before the announcement)," said Rashed Al Fouzan, a well-known analyst. The ramifications of the crash go even deeper in a society where an employed Saudi supports an average of 5.3 people, far above peers in emerging countries like Venezuela where the rate is 2.8, said businessman Mohammad Abu Dawood. Officials of the bourse regulator, the Capital Markets Authority (CMA), declined invitations to attend the meeting, said Faisal Alsayrafi, the event's chief organiser. The Saudi bourse has been trying to find its way to recovery since the dismissal last week of the CMA's chief. Mohammed Al Hamed, a psychologist, said the impact of the crash on the morale of investors may take years to subside. "Unfortunately the majority (of investors) have a poor investment culture. Access to information is not fair, it reaches some before others, our society is dominated by nepotism," Hamed said. One veiled woman, who did not identify herself, said: "There are women here who are asking men not to invest in the bourse because it has spoiled the mood in the household and destroyed their homes. They also beg of men not to invest under their (wives') names." Some bankrupt Saudis were reported to have forced their wives to borrow money from banks to buy stocks, hoping for a market improvement. |
| Posted by:ryuge |
| #10 but the level of transparency we require makes investors comfortable |
| Posted by: Frank G 2006-05-20 21:56 |
| #9 FG: ZF - true, plus (except for ENRON, a few others, etc.) the US Stocks, investments are run honestly, honorably, and will not be nationalized. Things like Enron aren't illegal in most places, because their disclosure requirements aren't nearly as elaborate as American ones. No need to disclose, therefore no need to lie. |
| Posted by: Zhang Fei 2006-05-20 20:59 |
| #8 ZF - true, plus (except for ENRON, a few others, etc.) the US Stocks, investments are run honestly, honorably, and will not be nationalized. Expect some foreign South American investment sto run for the border this year. |
| Posted by: Frank G 2006-05-20 19:53 |
| #7 Not investing, AFAIK. But lending at interest, yes. Lots of creative ways to get around the latter restriction, however. |
| Posted by: lotp 2006-05-20 19:26 |
| #6 Aren't things like investing and interest (receiving or paying) considered un-islamic? Just askin'. -M |
| Posted by: Manolo 2006-05-20 19:10 |
| #5 Events like this are the antidote to the idea that foreigners would pull their money out of the US just because they don't like American foreign policy. The reality is that there is more cash out there than profitable opportunities. By keeping all the money in-country, Saudi Arabia helped inflate a bubble that will probably drag down its economy for years. People invest in American securities because they see profitable opportunities, not because they like Americans. In fact, there is nothing sweeter than making money off a nation you perceive to be your enemy. |
| Posted by: Zhang Fei 2006-05-20 15:35 |
| #4 Oppps, scroll down and read the whole series, it a nice short introduction to small market economics. |
| Posted by: 6 2006-05-20 09:43 |
| #3 Participants asked why the state had not floated oil giant Aramco Huh? Ha ha ha Hee hee. The religious-policeman's been all over this hillarity. |
| Posted by: 6 2006-05-20 09:42 |
| #2 My guess is that the senior princes took their profits at the top. |
| Posted by: lotp 2006-05-20 09:11 |
| #1 Sounds like an inevitable event on a stock market anywhere. "But after I bought it, it was only supposed to go up!" |
| Posted by: Anonymoose 2006-05-20 08:53 |