Wednesday, January 25, 2006

Arab Stocks On The Rise

Every time I meet my friend Charbel we remember the big mistake we made two years ago when we both planned to buy stocks in Lebanon construction company Solidere but never did. Then a Solidere share was being sold for 4 dollars while now it reached 25 dollars.
It is unbelievable how much people in the region are focusing on Arab stock markets especially when we see how much shares rose last year and how great they have been doing so far this month.
Many people, whether in countries such as Egypt, Saudi Arabia, Kuwait, United Arab Emirates, Bahrain or Lebanon have for sure become rich because of buying and selling stocks. This business is spreading very quickly in the region with some people selling their property to buy shares.
During the day when I tune to Al-Arabiya television, most probably I will see Zeina Soufan, Seba Audi or Nadine Hany speaking about stocks. The Saudi Stock Market is by far the largest in the region and is also the most active. Its index rose in the past four weeks by nearly 1,500 points to reach 18,680 today. Petrochemicals company SABIC is one of the largest in the world and recently reported profit of about 20 billion riyals (some 5 billion dollars). There are several other giant companies like Saudi Telecom, Al Rajhi Bank, Saudi American Bank SAMBA not to mention cement companies or power stations.
There is no doubt that one of the main reasons behind this rise in stocks prices is the sharp increase in oil prices. An oil barrel that used to be sold for 10 dollars few years ago, today sells for more than 65 dollars. The Gulf has so much cash, some reports say half a trillion dollars, that were and are being invested in stocks, real estate and giant industrial projects.
Back to myself, although I am a strong believer that it is never too late, I will not buy stocks in the region because I believe stocks are over priced.
Not buying Solider was not the first time I miss such an opportunity to make money. In 2001, shortly before I moved back to Lebanon from Egypt where I lived for five years, a banker told me to buy some shares in Orascom Telecom. A share was being sold then for 13 Egyptian pounds (about 3 dollars). I did not buy fearing the company might not do well. Since then Orascom Telecom's business expanded quickly and the share rose to 30 times to 600 Egyptian pounds (about 100 dollar).
Today my friend Amer called me and said Solidere is expected to rise more in the coming weeks.
I don't think I will buy first because it is way too expensive for me and second because I worry, as I had been for years, about a drop in prices.
Maybe I have to be more courageous.
Bassem Mroue
Beirut January 25, 2006
11:30 p.m.


At 8:50 PM, Anonymous human growth hormone said...

good post

At 11:34 AM, Anonymous Anonymous said...

My dear,

The market rise you've seen has been financed by peoples' borrowings against their future earnings.When the market reached an enormously overvalued levels, there was no more buyers and now the result is 50% off, saudi 40% off others as well.
I'm a cynic when it comes to arabs developing a trade or establishing something from scratch.

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