Jeddah, Asharq Al-Awsat- According to official reports, more than half of the Kingdom”s population own shares in the Saudi stock exchange. This means that half of the citizens of Saudi Arabia are worried about market”s fluctuations.
In May of 2004, a number of Saudis suffered heart attacks, saw a sharp rise in their blood pressure, and some were even taken to hospital. The May events were not a terrorist attack but a crash in the Saudi stock exchange. Although the drop lasted for a mere two weeks, a large number of shareholders lost money.
Many economic experts describe the Saudi stock exchange as stable. More than half of Saudi citizens are again buying stock, a trend that became evident during the sale of the Al-Bilad Bank shares that were bought by 58 percent of the population. This, however, has led some psychologists and psychiatrists to caution that the Saudi people”s relationship with stocks and bonds is like that of matches with tinder.
Asked about the risks that are involved in buying shares and also the reason why so many Saudis invest in them, Dr Ali al-Faqih, a psychologist, replies "The reason is the dream of easy riches. People are naturally inclined towards profitable ventures even at the expense of their health. Furthermore many people enter the world of stocks and bonds without sufficient, sober thinking."
As to the risks, Dr Al-Faqih says "Saudi society is living in a state that I can describe as mass hysteria. This eventually has an effect on an individual”s psychological wellbeing, causing a large number of Saudis to suffer breakdowns and emotional disturbances. When they lose money, they also lose confidence in themselves, in society, and in all economic and social establishments."
Economist Ali Daqqaq, in contrast, believes that what happened in May 2004 was not the outcome of the Saudi citizens” inability to understand proper investment. He adds that the situation is different today. According to him, "the heart attacks and rise in blood pressure that occurred in May 2004 will not be repeated for a simple reason, namely, that the new investors in the Saudi stock exchange are entering the market prepared to learn and ask questions."
He adds, "When the investor thinks, asks questions, and looks for answers, this is proof that he is already emotionally prepared to control his own affairs. Online forums and special media outlets devoted to investment are helpful in this respect."
Daqqaq stated that the most important thing is to maintain an organized process of investment. He explains, "the existence of the Saudi Money Market Authority and properly licensed establishments in the stock exchange, in addition to carrying out the transactions properly through a broker, and the adoption of ethical conduct will help ease the emotional pressure on the investor."
Commenting on the issues of ethical conduct and the Saudi citizens” mass entry into the stock exchange, with 58 percent of the population participating, Dr Al-Faqih says, "A lot of inaccurate speculation has been going around. There is no proof that 58 percent of Saudis have bought stocks. If that were true, why do we have a poverty fund? The current process is frankly a sign of weakening social values. Some people are prepared to do anything to make money and they allow others to use their names in transactions in exchange for a payment of 500 riyals for example. The 58 percent figure does not reflect the facts."
Dr Daqqaq gives the following advice to Asharq Al-Awsat”s readers who dream of immediate riches on the stock market. He says "After the May 2004 crash we thankfully did not see further risky transactions. There is actually greater confidence in the Saudi stock market than in its US counterpart. This is not enough. An investor needs to accept the possibility of loss and must have an entry and an exit strategy."