Funkytime in the Arab markets

Discussion in 'Wall St. News' started by Pekelo, Mar 16, 2006.

  1. Pekelo


    They are reliving 2000 in the USA. History always repeats itself:

    Egypt suffered major losses on Tuesday, triggering angry protests in Kuwait and prompting some analysts to forecast a crash after a solid five-year upward run.

    The market in Opec kingpin Saudi Arabia, the largest in the Arab world, dropped sharply for the fourth consecutive day, reflecting what analysts said was a sharp correction across the region.

    The value of Gulf bourses dropped on Tuesday to just under one trillion dollars, down some $150 billion from their 2005 value and more than $250 billion below the peak.

    The Saudi Tadawul All-Shares Index (TASI) shed 4.75% to close below the 15,000-point psychological barrier for the first time this year at 14,900.40 points.

    The TASI has so far lost 10.84% since the start of the year and a whooping 27.8% from its all-time high of 20,634.86 points reached on 25 February. It has shed 16.9% during the past four days.

    "I think we are now at a serious turning point ... . It is certainly the beginning of a crash though the market is expected to resist at 12,200 points," said Ali Dakkak, professor of economics at Jedda-based King Abdulaziz University.

    Swift actions

    "We need swift actions and decisions to restore confidence to investors," a majority of whom are speculators who have been lured into the market by sharp price increases and handsome profits, Dakkak told AFP.

    But Kuwaiti financial analyst Ali al-Nimesh characterised the fall as a "long-term correction" rather than a crash.

    "It's still early to call it a crash. The indices are expected to rebound slightly sometime soon, but this appears to be a long-term correction cycle. It may continue for two years," Nimesh told AFP.

    He said he expected the Saudi market to lose between 50% and 60% of its peak before rebounding.

    In Kuwait, investors staged a protest outside parliament, urging MPs to intervene after the market registered its biggest single-day loss and closed at a six-month low.

    "We want a complete probe into what has happened in the market since last Wednesday," when the index began to slide, demanded one investor. "Is our government weaker than those pirates?"

    The Kuwait Stock Exchange Index finished down 3.7% or 382.90 points at 10,057.50 points, its lowest close since 14 September. It is now 12.1% below its 2005 close and down 16.6% from its all-time high of 12,054.70 set on 7 February.

    Cash injection

    The Kuwait Investment Authority, the state investment arm, promised to inject cash into the market on Wednesday after a protest by hundreds of small investors after the index dropped 257.8 points.

    Stock markets also plunged in the United Arab Emirates, Bahrain and Qatar.

    In Egypt, the Cairo stock market trimmed its losses to 6.62% after trading was stopped in early afternoon when the main index lost 11.3% in early afternoon trade, its biggest single-day drop in five years.

    The index was at 5589 points compared with the close on Monday of 6296.

    Analysts said a correction in the market was inevitable given the 148% gain in 2005 and the speculative bubble it fuelled.

    "A correction was not only necessary but inevitable," said Ahmed Hefnawi, analyst with investment bank EFG-Hermes.

    "There were people in Egypt that quit their jobs to play the stock market, today they will pay the price."

    Dakkak attributed the regional loss to action by Saudi dealers, who invest heavily in all Gulf stock markets, and have recently pulled out to cover losses back home.

    "It is a chain reaction. Saudi investors have withdrawn much of their money from stock markets in the Middle East, including Egypt and Jordan, causing them to decline."

    Abundant liquidity

    Gulf markets have increased six to seven fold since 2001 because of abundant liquidity generated from a sharp rise in oil revenues.

    The upward trend and lucrative profits lured millions of small investors including women.

    "Almost 60% of Saudi investors are small dealers. They depend mainly on speculation and whenever a decline happens they try to exit, causing the market to slide," Saudi economist Abdulaziz al-Daghestani said.

    "Recently it became like gambling and not investment in most Gulf markets. That's why we are seeing the fast fall."
  2. this story illustrates one striking thing about the markets. the pattern of human emotions and fear and greed are the same everywhere.
  3. you have an uncanny grasp of the obvious.
  4. Anyone have an idea on how to short these markets. I looked at arab ADRs, but they are not actively traded enough. I also can't find and ETFs based in the Middle East either. I'm sure some Arab stocks trade in Europe, to bad my broker does not offer European equities. There has to be some unconventional way of shorting these markets, especially Egypt. Any wacky ideas?
  5. Get data on the market you want to short. Run a correlation study on other world markets/individual issues. When you have a match or polar opposite get to working.
  6. zdreg


    if life was so simple....

    step 1 is to determine whether you can short the market in the home country.
    step 2 is to determine whether the funds used would be subject to currency control.
    satep 2' is to determine how to hedge the currency risk
    step 3 is to determine if there is any liquidity
    step4 is to determine if you can short the country in question outside the country.

    step 5 is to determine correlation if that is what you are interested in

    the war is won before the 1st battle is fought - TZU
  7. dis


  8. that's kewl; mkts crashes(corrects) I lose money and go on strike, demandin' chopper to inject some cash in my acct.

    why tf didn't I think about this before?
  9. This market correction in the Middle East is long overdue. Last year most of these markets were up 150 to 250%. It will be painful, however, for many small investors. For many... they have never seen such a correction/crash and have only known the bull run of the past 4-5 years. Many similarities to the US markets in 1999 when daytrading took off.

    I'm an American citizen currently living (and trading) in Doha, Qatar. If the selling continues in these mideast markets there will be consequences.
    #10     Mar 16, 2006