False dawn in stocks

If you happen to be a stock market investor in Saudi Arabia, you are probably in state of total confusion. The chances are that you have lost a fair amount of cash recently. In fact, it's likely to be a huge, huge amount. But hey, don’t worry. Under the new rules being implemented, you can soon carry on investing in the stock market - safe in the knowledge that you get to keep all your winnings, and the Saudi government funds all your losses.

  • E-Mail
By  Anil Bhoyrul Published  May 21, 2006

|~||~||~|If you happen to be a stock market investor in Saudi Arabia, you are probably in state of total confusion. The chances are that you have lost a fair amount of cash recently. In fact, it's likely to be a huge, huge amount. But hey, don’t worry. Under the new rules being implemented, you can soon carry on investing in the stock market - safe in the knowledge that you get to keep all your winnings, and the Saudi government funds all your losses. Is this for real? I too am a little confused. The Saudi stock market is the largest in the Arab world, but has also managed to lose 50% of its value in the space of just two months. Many investors in smaller companies have seen 75% of the cash disappear down the stock market hole. They have been badly burned, and quite understandably, never want to go near the markets again. Not surprisingly, Saudi King Abdullah realises there is a financial crisis engulfing him: if nobody wants to invest in the market, no amount of good news will give it a boost. Hence the announcement of the a so-called “risk free fund”. Under this scheme, investors can place up to US$133,000 into shares over a two year period. They will keep all gains, and the state will fund all losses. The fund will only be available to those with limited income, specific types of employees and others deemed to be in the low pay group. Around three million people are thought to fall into this category. So it is a good idea? As a way to move markets artificially, yes, a fantastic move. No doubt several hundred thousand, if not a few million, Saudis will take up this offer of a lifetime. The volume of trading will give the market a temporary boost, helping push it back to the levels seen a year ago. But fundamentally, this amounts to the state subsidising a stock market. It does in many senses defeat the whole concept and principles of stock markets. It could also set a worrying precedent around the Arab world, and dent the entire region’s credibility as an international financial hub, operating to international standards. The Saudis should think long and hard before going down this road.||**||Happy weekend|~||~||~|The UAE’s Minister of Labour Dr. Ali Bin Abdullah Al Ka’abi earlier this year suggested that the country should move to a Friday – Saturday weekend. The fact that the UAE cabinet has now ratified this move, which will become law from September 1st this year, is to be hugely welcomed. Nobody can argue that it will give a huge boost to business, in particular the stock markets. If the UAE really is to make it a major international financial hub, then working the same days as much of the Western markets is a good start. The problem is that the rest of the Arab world needs to follow this move, and do so quickly. Only Jordan, Qatar and Syria also recognize Fridays and Saturdays as the weekend. In particular, Kuwait, Saudi Arabia and Egypt need to urgently consider doing the same, bringing their own financial markets in line with the UAE – and much of the West. Whichever way you examine this issue, there is no concrete argument for a Thursday – Friday weekend. Not just for the stock markets, but for schools, the public and private sectors. If anything, September 1 is too far away.||**||Don’t blame Jacko|~||~||~|This week we feature the financial demise of the King of Pop, Michael Jackson. As we reveal, while Jackson was staying at Dubai’s fabulous Burj Al Arab hotel last year, he was also in lengthy meetings with his bankers, working out how to pay off hundreds of millions of dollars of debt. Whatever you think of the star or his music, you have to feel sorry for his financial state. Sure, he has an uncontrollable spending habit. But having earned the best part of a billion dollars throughout his career, who wouldn’t? The real culprits here are not so much Jackson but the group of financial vultures that have surrounded him for much of the last thirty years. Their advice, their schemes and their plans have brought him to the brink of bankruptcy. Most of these former advisors are now sitting on a beach in the Caribbean, counting the millions of dollars they made in fees. Like I said, whatever you might think of Michael Jackson, his merry band of ex-advisors are far more appalling individuals.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code