JEDDAH, 8 November 2006 — A recent study has found that investors who lose money in the stock market are mainly those who invest without sufficient technical knowledge about how stock markets operate.
The study, which was conducted by the Jeddah-based sociology magazine Majallah Al-Ulum Al-Ijtimayyiah (www.swmsa.com) on the impact of stock dealings on Saudi society, underscored the importance of investors equipping themselves with sound knowledge of stock market mechanisms before investing their cash. The study warned that potential investors should not be swayed by blind speculations if they want to be on the safe side both economically and psychologically.
The study attributed the increased public interest in the stock market to the trend in local companies to float their shares. It has also been noticed that Saudi investors began to focus on buying shares in Saudi companies in 1999. The increasing credit facilities provided by banks has also been instrumental in attracting more people to the stock market.
Announcing the findings of the study, Talal Al-Nashiri, chief editor of the magazine and supervisor of social and psychological services at the Health Ministry in Jeddah, said the studies surveyed 101 Saudi stock market investors following the collapse of stock prices a few months ago. The sample group comprised of 66.3 percent men and 33.7 percent women. Government employees accounted for 52.5 percent while 23.8 percent of them were students. The study also showed that office hours, which end at 2.30 p.m., is a major factor that facilitates greater participation of government sector workers in stock markets. Employees of the private sector participate in the stock market activities at a lesser rate of 11.9 percent because they have longer working hours, the study added.
The study also discovered that bachelors, who are more likely to be worried about their future, are more interested in making profit in the stock markets than the married people. While 53.5 percent of the investors were unmarried, 42.6 percent were married. The number of widowed and divorced people interested in buying stocks ranged between three percent and one percent.
Only 29.7 percent of people interviewed relied on the information supplied by the Capital Market Authority when making investment decisions. The same percentage of people depended on the market analyses supplied by specialized establishments and economic programs appearing in the media including the radio and television. While 40.6 percent got their information from the Internet, which has been known, on many occasions, to withhold vital facts from the public. The study found that 85.1 percent of the public believed that the available stock market analyses were insufficient while the remaining were content with the analyses.
The study also found that about 23.8 percent of people asked were satisfied with the performance of the CMA while 76.2 percent believed that CMA did not rise up to the mark which in turn made them turn to Internet sources for further share market information. Government employees and students preferred to mostly deal in the stock market in the evening.
About 82 percent of participants believed that several companies leaked vital information about them before their official announcements. This is the situation that has undermined the credibility of the market. The study also found that the sharp fall in the stock market index created psychological shocks to 89.1 percent of the investors while causing economic problems to 87.1 percent. The majority of the participants believed that the stock price crashes led to several problems including family quarrels.
The study also found that 87.1 percent of the participants felt that investments should be diversified instead of concentrating on the share markets.
