Financial analysts warned investors that these foreign companies would immediately liquidate their portfolios at any sign of loss without informing them. They explained that according to the foreign exchange trading agreement, the companies have the right to protect themselves through the immediate liquidation of individual portfolios without notice.
The financial experts asked Saudi citizens and foreigners living in the Kingdom not to fall easy prey to such companies, saying that investing in foreign exchange carries exceptionally high risk. "A Forex investor may lose his entire capital in a single day," a financial analyst said. He did not want to be identified.
"Foreign exchange markets are extremely risky. They are only being used as hedging funds against fluctuations of major currencies to the dollar. They embody high risks for people with no or little experience in foreign exchange," said Turki Fadqaa, head of the research department at Al-Bilad Investment Company. He warned the companies were only targeting investors with little or no knowledge of foreign exchange, eventually subjecting them to great losses.
Fadqaa described the claim of one of the companies that it had about 600,000 Saudi investors as doubtful and said there was no accurate data about dealers in foreign exchange markets.
He said the foreign exchange markets have unique features that tempt investors, including their high liquidity and the fact that they work round-the-clock from Monday to Friday through international banks that provide them with exchange rates and other services. "These companies benefit from the price differences and the commissions they get from the clients,” he said, adding that another feature in favor of these companies was that clients could always deal with them electronically.
Fadqaa said none of the foreign companies was licensed to operate in the Kingdom. "This is why they use the Internet to publicize their activities," he said.
Fadl Abu Al-Ainain, an economist, said investing in foreign exchange markets is of very high risk and advised individual investors to be very cautious before they lose their entire funds. He said the companies provide credit coverage of up to 400 percent of their capital to attract them. "An investor who only has $20,000 may deal in $100,000," he said.
The economist warned such companies were only after financial gains and they would not care when their investors were subjected to financial losses. "These companies put all the risks on their customers. When the market is flourishing, they tempt the customers into expanding their portfolios to gain more commission, but when the market shows any sign of stalemate, they would not hesitate to dump them like hot potatoes," he said.
