RIYADH: The Saudi stock market reopened after the Eid Al-Fitr holiday amid a global financial storm. On Monday the market shed nearly 10 percent of its value.
“It is a crisis that is not exclusive to the Saudi market,” said Sanhat Al-Otaibi, professor in the Business Administration Department of King Saud University. “In principle, the world is a small village, and the phenomenon is a global one.”
Yet Al-Otaibi indicated that the three days of continuous drop is larger than that of the American market and that the reaction is exaggerated.
Tariq Al-Sakkat, an investor in the market, believes that the downward trend of the Saudi market is not a direct result of being tied to the international market. “There is a global crisis we have to admit, and it should influence our market, but by 10-15 percent only,” He said, adding: “For the last two years we were facing a crisis while the rest of the world markets were robust and it is ironic that our market is affected even harder than the American or the European markets now.”
Abdulla Al-Harbi, professor of accounting and information systems at the King Fahd University of Petroleum & Minerals, said many took advantage of the international market crisis.
Late management decisions are one of the main reasons for the panic that caused the drop, Al-Otaibi said. “The signs of the crisis are since the Lehman Brothers’ bankruptcy on Sept. 7 but nothing was done, no interference or even assurance was made leaving people to face speculations and panic,” he said. “The assurance is not convincing, as the trust is lost in the Saudi Arabian Monetary Agency (SAMA) and the officials,” Al-Sakkat said. He pointed out that there was no official appearance or statement for two days during which the investors were stumbling on their own, unwise decisions that caused more damage to the market. “On the third day an official from the SAMA appears to deny that we have any problem and that what is happening internationally has no effect on our market,” he added.
Abdul Aziz Al-Khaldi, branch manager at Samba Financial Group in Riyadh, stresses: “Investors expected officials to step out with a statement to assure or even explain to them what is happening.” He added that when left in the dark the investor panicked and started selling causing more damage.
Many experts called for the market to be closed temporarily to reduce the losses, but others looked at it as a step that should have been made before the opening.
Al-Otaibi pointed out that the signs of the crisis were there for the last year. Nevertheless American mortgages were being sold repeatedly without any consideration to the upcoming crisis or the speculation of one. “We tied ourselves to the dollar, which worsened our market status, and stopping the market is a belated step now,” he said. Al-Otaibi indicated that such a step should have been made before opening day.
“The Saudi market should have stayed closed as a continuity of the vacation, until the international situation was cleared,” he said. “The Gulf market opened before the Saudi market and the symptoms of a drop were showing, why didn’t the officials monitor the Gulf and international markets and delayed the opening?” asked Al-Sakkat indicating that the Saudi market will never regain investors’ confidence unless strict measures are taken.