JEDDAH, 5 March 2006 — What goes up must come down. Small-time stock investors discovered this law of nature last week when the Saudi stock market shed a little over 10 percent of its value.
These investors are, as one might expect, not too happy with their losses, and some have blamed forces beyond their control, Al-Madinah Arabic newspaper reported.
“This is all because of the big shark investors,” said Ahmad Al-Ghamdi, a consumer investor. “They lure us small-time investors. When we enter the market, they suddenly crash the market to benefit from the panic by buying the stocks at low prices.”
Last week saw equity being pulled out of the Tadawul, as the Saudi stock market is called, and this retreat compounded as prices declined. The Capital Market Authority (CMA), in charge of regulating the Tadawul, has imposed a tighter limit to how far a stock can increase or decrease in value, from 10 percent to 5 percent. This means that a stock can gain or lose 5 percent of its value before trading of that stock is halted to allow prices to stabilize. Some wealthier investors are not happy with this move.
Saad Al-Harbi, a low-equity consumer investor, said that the “sharks” played the damaging role in last week’s decline. The CMA’s position is that the decline was part of the natural ebb and flow of equity, a mini-bubble burst in an otherwise healthy market.
“Market indicators always go up and down slightly,” said Al-Harbi. “But what happened last week was a big crash in the market. This is exactly the type of game that big sharks are playing in the stock market to scare investors. The CMA should step in and put an end to this nonsense that is affecting our money and future. We lost a lot. The government is calling for investment. With such volatility, who is going to invest in the local market? I think CMA should check the big sharks.”
Nevertheless, the stock market is rebounding.
A stock analyst, Turki ibn Matar, said psychological factors play an important role in the condition of the stock market. “Small-time investors are selling their stocks randomly while big-time investors are refusing to enter the market because of CMA decision (to tighten the band within which a stock gains or loses value before trading is halted on that stock). The CMA is not backing down from its decisions because it expects that the stock market will improve in a positive way in the future.”
