Saudi stock exchange has been witnessing huge losses for the second week respectively. According to a report issued by Al-Hayat news website, Tadawul—the stock market of Saudi Arabia—lost more than $3.5bn due to declining demand.
The report added that the liquidity in the market declined by 18%, affecting the Tadawul All Share Index (TASI) negatively.
However, the Egyptian Exchange (EGX) witnessed a small drop in its Benchmark Index, EGX 30, after a two-day hike.
Daily News Egypt asked several experts whether the Egyptian market would benefit from the huge drop of Saudi exchange. Ahmed Farouk, managing director of the Egyptian Company for Financial Brokerage, said that the main problem for Saudi Arabia is the fall of oil prices. This pushed the government to implement austerity measures, such as imposing taxes and cutting subsidies, which affected all of the county’s companies. Farouk believes Egypt could benefit from such a thing if it fixed the problems it faces.
“The instability of decisions and the foreign currencies shortage,” says Farouk about the main problems affecting investment in the Egyptian market. He said that the shortage prevents investors from transferring their profits out of Egypt.
However, he had an optimistic vision for the Egyptian exchange. He believes that EGX-30 is currently going upwards, adding that all of the companies say that its shares’ value is increasing.
From a different aspect, Mohamed Fouad, CEO of Global Capital, stated that the main investors in the Middle East don’t mind changing the direction of their investments to any other country in the region, including the Saudis themselves. He said that Tadawul is losing a lot of its value, since the rich oil country is militarily engaged in Yemen’s war and indirectly involved in the Syrian Civil War.
The instable price of oil is enhancing the problem, which made an unprecedented budget deficit for the biggest oil exporter in the world.
It is worth mentioning that Brent Crude’s price declined by 0.24% on Monday, recording $56.57 a barrel.
“The flotation made the economic atmosphere more attractive for foreign investors,” Fouad noted.
Fouad believes that the Egyptian exchange will naturally attract capital from the Gulf. He added that EGX has to develop itself to be as modern and as up-to-date as other stock markets around the world.
Regarding the vision for the near-future term, he said that the Benchmark Index will increase during the current year, adding that 2017 is the year when Egypt earns the benefits of reforms it had implemented.