Arab stock markets are always accused of being inefficient. Are they really inefficient? This is a question that has many answers, but through my monitoring of emerging Arab markets I see that such a proposition is not 100% accurate, for several reasons, the first of which is that these markets, or at least some of them, are newly established. Secondly, the Arab investor did not know the nature of the stock markets well and did not know that these markets are very risky, and the Arab investor is new to learning about the nature of how the markets work, so we find his timing random in the buying and selling processes. Some of them rely on luck and success more than on craftsmanship in the buying and selling process. Third, most of the traders in the Arab markets are individuals who do not have enough time to follow the market and its news due to their preoccupation with their work. Fourth, the Arab investor’s lack of confidence in the financial institutions that invest on his behalf. Finally, there is a complete lack of knowledge on the part of the investor of the basic market drivers in light of which the markets move. Stock markets are very sensitive and precede events. If you expect economic growth in the local economy, it will rise before it, and if you expect the opposite, it will fall before it. Let us take the Saudi market, for example. There are two important factors that move the market. The first is the internal factor, sometimes called the cyclical factor, which is the budgets issued by companies that are announced every quarter, and in light of them, the decision to buy and sell can be made. Secondly, the management and the extent of its efficiency in managing the company, and this is known through the management’s reputation. Thirdly, the company’s activity and its ability to expand or not. Fourthly, the company’s future plans or what is known as growth, and companies are supposed to announce it whenever they decide to implement a specific expansion plan. There is also an external factor in which the market has nothing to do but directly affects the market, such as raising bank interest rates. There is an inverse correlation between raising interest and falling market prices, and between lowering interest rates and rising market and oil prices. There is a direct correlation between oil prices and the market. The higher the oil prices, the higher the market prices, and the lower the oil prices the lower the stock prices. Then there is the last factor, such as wars, crises, and natural disasters. If there is stability in the country and the region, the market will proceed according to the internal factor, but if there is no stability, stock prices will fall. For example, when the “Al-Aqsa Flood” operation began, the Saudi stock market index declined and then began to fluctuate according to the course of the battle, and the same is said about natural disasters, may God protect us and you from them. May you live long. Source: Asharq Al-Awsat newspaper
