Speculation plays havoc with bourses

AMMAN — Arab stock markets are expected to suffer further from the conflict between Israel and Lebanon’s Hezbollah, financial analysts said yesterday.

By (DPA)

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Published: Sat 22 Jul 2006, 10:32 AM

Last updated: Sat 4 Apr 2015, 3:14 PM

But they warned that “coalitions of speculators” were exploiting regional military operations to push down prices with a view to buying shares at cheap prices and make huge profits.

“I believe coalitions of speculators are teaming up to put downward pressure on prices and force sell-offs on the part of scared small investors as happened several times in the past three months,” an Amman-based portfolio manager told Deutsche Presse-Agentur dpa.

“Military operations can justify price plunges in Lebanon and Israel, but cannot justify faltering markets in a country like Saudi Arabia, where economic fundamentals tell another story,” he said.

The Saudi stock exchange, the Arab world’s largest bourse, continued its sharp decline this week with “current political tensions in the region leaving a negative impact on investors’ sentiments”, the Riyadh-based Bakheet Financial Advisors (BFA) said in its weekly report.

The Tadawul All Shares Index (TASI) plummeted 11.7 per cent to close t 10,485.06 points from 11,868.42 points last week.

TASI is currently 37.3 per cent lower than at the start of the year, BFA said.

BFA attributed the decline partly to the “decelerating growth” in six-monthly profits of listed firms. “It is worth mentioning that the 20 largest-cap companies reported a 9 per cent growth in their accumulative profits in the second quarter over the first quarter of 2006, while their half-yearly profits grew 28 per cent over the respective period of last year, the BFA report said.

“The BFA projects a 30 per cent growth in the total profits of listed firms in 2006 over 2005, while the actual profit growth was 44 per cent in 2005,” it added.

The consultancy house expected investors “to re-evaluate their portfolios and consolidate their positions” after all semi-annual results of listed companies had been published.

Saudi analyst, Abdullah Al Harbi, said “the sharp decline in the prices of Saudi shares is unjustifiable” given the huge oil income which is due to accrue to the world’s largest crude exporter this year.

“I think the market is becoming entirely under the control of groups of speculators,” he added.

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