Saudi Stock Market Crash

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Financial Management “FIN 511” MONAEM MOHAMMED ALSOLAMY MAM016 Saudi stock market’s Crash In 2006, the stock market in Saudi Arabia collapsed and the price index lost around 65% from its value. The market was rising from 2,500 to 20,000 points in three years, suddenly the market price dropped to around 8,000 points in several days. Saudi stock market History: * The Saudi stock market started in 1984 * the Saudi Shares Registration Company was established in 1985 * an Electronic Securities Information System was introduced by the Saudi Central Bank to facilitate multi-location trading in 1990 * TADAWUL was initiated in 2001 * Capital Market Authority (CMA) was formed in 2004 to regulator and supervisor of Saudi Arabia’s capital markets, and issues the necessary rules and regulations to protect investors and ensure fairness and efficiency in the market Saudi stock market’s Crash: Since 2001 the huge number of people started to invested in the Saudi stock market resulting a rapid increase in the demand for the stock. The fund of those investors either from their wealth or from the banks loans. The market was promising and a lot of investors were looking for fast way to generate wealth. Because of this huge demand in the stock market the stock price index went from around 2,300 points in 2001 to 17,000 points in the begging of 2006. In February 2006, the price was in its maximum above 20,000 for one week. No one was questioning the ridicules increase in stocks prices or looking for the financial position of the company they were investing in. at that time the rumors and the self-interest were controlling the market rather than the facts and financial analysis. This is why a the stock price of company like Bisha which has no value in the market was overestimated. Only those whom had enough knowledge in stocks behavior understand
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