RIYADH (Reuters) – Fahad, a thick-set 22-year-old, stands proudly next to the brand new Cadillac he bought with money made trading on the kingdom”s booming stock market.
"I also bought a Mercedes. Praise be to Allah, I have done well," he said during a break from a busy trading room in Saudi Arabia”s capital.
Fahad decided six months ago to try his luck in the stock market, which has shot up around 300 percent in two years as oil prices and corporate profits have soared and local investors continued to repatriate capital following the Sept. 11, 2001 attacks in the United States.
"My father gave me around 3.5 million riyals ($933,300) to buy shares. I now have around 5.2 million," he said.
He invested mainly in petrochemicals giant Saudi Basic Industries Corp. (SABIC). Over the past year, shares in the firm have climbed 46 percent to 1,165 riyals.
Inside his bank”s dimly lit domestic trading room, anxious investors sit on rows of armchairs and squat on floors, their eyes glued to large projection screens showing prices for the kingdom”s stock exchange, the largest in the Middle East.
Similar scenes can be witnessed up and down the country, as trading floors have become the epicenter of Saudi Arabia”s recent fixation with the stock market.
Half the kingdom”s 16.5 million population applied for shares in its new Islamic bank, Bank AlBilad.
Newspapers reported scuffles for application forms when subscription opened in February, mirroring the competition for shares in November”s offering of mobile phone operator Etihad Etisalat (Mobily), which was 50 times oversubscribed.
Electronic information providers are scrambling to supply enough trading room terminals. Technicians behind the bourse”s Web site, Tadawul, say they are run off their feet trying to cope with growing user traffic.
Investing in the stock market has become almost a full-time job for 40-year-old Ahmed, who previously had a quiet job in real estate.
When he is not jostling for space in the trading room, he is poring over market graphs and economic journals.
He said he jumped on the share bandwagon around a year ago for the chance to make a quick profit and because of a lack of other investment avenues. He says he has doubled his initial investment, making hundreds of thousands of riyals.
"The very rich to the very poor are buying and selling shares," he said. "I have seen people queuing up to take part in share offerings. Banks have even had to close their doors because of the crush." But he pointed out that there have been big losers as well as big winners. "People who have little knowledge about the stock market and its companies have not done very well. Some of them have got into debt and lost their homes and cars."
Some investors fear the Saudi market is heading for a big fall, saying many listed companies are overpriced.
"I think I might get out of the market before the end of the year. It”s a bubble," said Fahad.
Others are concerned the bourse is too reliant on SABIC, which accounts for around 25 percent of the total market capitalization and whose fortunes are hostage to swings in world oil prices.
Also, the Saudi Chambers of Commerce and Industry said 95 percent of Saudi companies are still family-controlled, including 45 of the top 100 companies in the kingdom.
But National Commercial Bank Senior Economist Muhammad Malick struck a more optimistic note.
"Corporate profits were up 45 percent in 2004. The fundamentals are still looking good," he said. "Oil is the bellwether of the economy. If there isn”t a crash in oil prices, then I expect the stock market to continue growing."