- The Washington Times - Sunday, March 19, 2006

It is known for Porsche-driving princes and the lavish lifestyles of the oil-wealthy, but Saudi Arabia’s rich investors have been selling their cars and even rushing to the doctor after a whirlwind stock market crash erased huge profits.

Heart attacks, stress, hospitalization and panic selling are reported results of the Saudi collapse, which has posted tens of billions of dollars in losses in the past two weeks.

Last week alone, the Saudi market fell by 20 percent, with only the promise from a prince to invest $2.6 billion as a temporary measure to stem the financial bleeding.

The losses have been felt particularly hard in the kingdom, where more than a third of the 17 million population dabbles in the stock market. With years of soaring profits fueled by ever higher oil prices, small investors have rushed to get in on the action. Speculators created a “bubble,” which now is correcting, analysts say. Panic and despair have hit the almost 60 percent of Saudi investors who are small dealers speculating with family savings.

“Many individuals have pulled their savings out of banks and put it into local stocks, with many even borrowing to the limit to do so,” said Khan H. Zahid, vice president at Riyadh Bank in the Saudi capital.

There, dealers in the luxuries that have become part of the Saudi image reported a collapse in sales.

“Our sales have dropped by more than 40 percent in the past two weeks. Many people are even coming to us to sell their cars,” said Mansur Al Suqairi, the owner of one car showroom.

The market crash, which analysts predict could wipe away up to 60 percent of stock value before bottoming out, also is being felt outside Saudi Arabia.

Across the Gulf and the Middle East, markets have crashed, fueling protests and the anguish of day traders, who had become used to skyrocketing prices.

“Recently, it became like gambling and not investment in most Gulf markets,” said Abdulaziz al-Daghestani, an economist. “That’s why we are seeing the fast fall.”

For many average investors, who are accustomed to the six- to sevenfold rise in Gulf stock markets since 2001, financial talk of “corrections” is not good enough.

In Kuwait, the market has slumped 15 percent in a month, and in Egypt, where the stock bubble increased shares 148 percent in 2005, the regional crash also is felt sharply.

“There were people in Egypt who quit their jobs to play the stock market,” said Ahmed Hefnawi, an analyst with investment bank EFG-Hermes. “Today they will pay the price.”

The Gulf’s linchpin, Saudi Arabia, is being blamed for the financial meltdown. Investors there have fueled their own market and bought in neighboring markets. Now that they are withdrawing what money remains, all the stock exchanges are suffering.

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