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Tuesday, December 06, 2005

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HEADLINE
 
Stock market frenzy becomes the big news in Gulf region
Roula Khalaf, FT Syndication Service
12/6/2005
 

          LONDON: When Dana Gas, the Gulfs first private sector energy company, announced the allocation of shares to retail investors in its $561in initial public offering (IPO) in October, the pan-Arab television network al-Arabiya flashed it on the screen as breaking news.
The report - revealing that each investor from the region would get no more than 1,750 shares (at only DH1 each) - came as a huge disappointment to investors, particularly the thousands of Saudis who had crossed into Dubai to lodge share applications and had to spend the night in parks because hotels were overbooked.
"The phones here were ringing like mad after the breaking news," says Jamil el-Haje, head of business news at al-Arabiya, as investors sought more information.
Al-Arabiya's coverage of Dana Gas underlined a new strategy by the Saudi-backed station set up in 2003 to provide a softer alternative to Qatar's al-Jazeera. Its greater focus on business and stock market news comes in response to the new investor culture developing in the Middle East, particularly in the Gulf, where huge financial liquidity from oil revenues has generated an unprecedented interest in equity markets. The Shuaa Capital index for Gulf countries is up more than 92 per cent since the start of the year.
Since July, al-Arabiya has been devoting more than four hours during the day to business programming while maintaining its focus on politics in the evenings.
"Stock market reports are now daily news, they affect people's lives," says Mr el-Haje. "When 8.0m Saudis [nearly half the population] try to buy shares in a bank, as recently happened with one IPO, that is a new trend, and one in which people are making money."
For al-Arabiya, business coverage is an attempt to get an edge over the competition in Saudi Arabia, the largest market where advertisers boycott al-Jazeera but viewers are attached to it.
"The subject all people care about in the Gulf now is the stock market, not Palestine, Iraq or terrorism," argues Abdelrahman al-Rashed, al-Arabiya's general manager. "Maybe it's a temporary case but the interest is at record high. That could give us the rise of a middle class and an increase in purchasing power, so advertising will also go up."
Much more than during the 1970s boom, the new surge in financial liquidity is trickling down, this time through the equity and property markets.
Some governments, including in Saudi Arabia, are deliberately structuring privatisations on the stock market in a way that allocates shares to as many investors as possible. According to the Institute of International Finance, the global financial association, about $1.8bn (eurol.54bn, 1.0bn) was raised through IPOs in the Gulf last year and as much as $4.0bn over the first six months of 2005.
As a result, investing is now becoming part of the popular culture. Internet : sites and chat rooms discussing stock prices are among the most popular.
"People are becoming stakeholders in the economy," says Mohsen Khan, Middle East and Central Asia director at the International Monetary Fund. "There is no opposition to privatisation because people might have a chance of owning parts of the companies."
The changing culture is forcing governments to regulate capital markets better in a region where budgets are treated like national secrets.
Interest in stock markets is helping to relieve political pressure on governments. But perhaps not for long. With analysts warning that stocks are reaching unrealistic levels and small investors often relying on rumours to make investment decisions, sharp corrections may be inevitable, hurting the unsophisticated investors most.
Mr al-Rashed says alArabiya is playing a role in raising awareness about the dangers, as well as the benefits, of the market frenzy. "Television coverage is also for the masses, so small investors listen to us," he says. "If there is a crash we'll be more important for viewers. They will need us more."
Reporting on markets in an environment that still lacks transparency has been an uphill struggle for al-Arabiya. Viewers regularly telephone the station asking newscasters to recommend stocks; analysts who appear on programmes have to be very carefully vetted.
"We try hard to get the most credible analysts that will not issue recommendations on air. And we don't refer to people as 'financial analyst' because this title doesn't exist in Saudi Arabia, for example," says Mr el-Haje. The station, he adds, is hiring newscasters with a business background and a new policy demands that employees investing in stocks hold them for two years.

 

 
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