Investors at the Qatari bourse have become poorer by an incredible QR37.96bn (over $10bn) over the past five trading days as the stocks have been involved in a huge downslide.
The market capitalisation of the Doha Securities Market (DSM) slumped to QR191.45bn yesterday from a still impressive QR229.41bn on January 15, making the loss on average a day to more than QR7bn.
This is the second time the 12-year-old equity market is facing such a crisis. The first time it was in early April 2005 when right after opening up to foreign investors, the overheated market had lost an astronomical QR47.73bn in capitalisation over just eight trading days.
But the daily loss on average at the time was only QR5.25bn and the index of the DSM was still ruling at over 9,000 points, while yesterday, the index slipped below 5,000 points a record five year-low, to 4,589.76. This was almost the level in February 2004.
The index shed a huge 8.26 percent, or 413 points, at the end of trading yesterday in a seemingly unstoppable fall which has been continuing since January 15.
Over the past five days of trading since last Thursday, the index has lost an incredible 27 percent, or more than 1,040 points, with investors panicking and calling for lowering the cap on daily fluctuations in share prices to five percent from the existing 10.
“This is the only solution… The cap was five percent earlier and was doubled as the market became more mature and broad-based,” an investor who briefly gave his name as Bakhit said.
Analysts are attributing the nosedive to a selling spree involving big foreign corporate and portfolio investors, and not to reduced profits being reported by some listed companies.
“If that’s the case then why in some other GCC countries, despite some major listed entities reporting losses, their equity markets are doing relatively well,” argues Thamer Hassan, a financial analyst.
In Qatar, at least companies are not reporting losses. If at all, they may only witness reduced profits, said Hassan.
Some mega players on the DSM might be exiting to pump funds into their main businesses since they may be battling liquidity shortages due to the global credit crunch, said another analyst who wanted to remain anonymous.
Hassan said he expected a correction to take place in the market after four days of slump yesterday but an unprecedented selling spree pushed the index down to record lows. At least 12 of the 43 listed stocks fell by more than nine percent in yesterday’s trading.
However, since the Qatar Investment Authority (QIA) has transferred cash to some five local banks as partial payment for their shares it decided to buy at October 2008 prices, the stocks situation is likely to improve.
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