Recent setbacks in the Saudi stock market are not directly linked to the global financial crisis, said National Commercial Bank chief economist Sa'eed Al-Sheikh who cited other reasons including the sudden introduction of new measures by the Capital Market Authority (CMA). He said market manipulation by individual investors and a lack of sufficient institutional investors make the Saudi market vulnerable to fluctuations from a herd mentality sparked by rumors. The CMA did not give investors enough time to understand or prepare for the new measures, Al-Sheikh said, noting the lack of transparency in the decision-making process at the time. For example, the move to allow foreigners to invest was poorly defined in terms of its goals and in its application, he said, noting the resultant poor response from investors. It should have been carried out in phases, Al-Sheikh said. Then again Initial Public Offerings (IPOs) are attracting mostly short term investors and not medium or long-term players, he said. Some recent IPOs, such as those of insurance companies and family owned businesses allowed only one share per investor, raising questions about the need for such a restriction, he said. Overall, only greater professionalism in its processes will give the market credibility, he said, adding that the current volatility is largely because of a lack of important financial products like bonds and commodities. Profits for the first half of this year were up 20 percent and the market has begun to show signs of recovery following the global crisis, jumping from 6932 points to 7713 before falling again to 7387. The turbulent week closed with a small rise of 7586 points, 2.7% above the previous day's trading. “If we look at the market in terms of performance and investment opportunities,” Al-Sheikh said, “many companies offer attractive investment opportunities, especially considering the strong national economy and the huge surplus expected in the coming year's budget because of the surge in oil prices and the unprecedented levels of production.” – Okaz __
