Stock crash hits Saudi plan to spread oil wealth

It was meant to be Saudi Arabia's bold attempt to more fairly distribute the vast wealth of another oil boom. But mass share-ownership has ended in tears for many ordinary Saudis.

Hundreds of thousands got their fingers burnt in a stock market crash since February that has sheared some 40 per cent from the value of the Arab world's largest bourse.

Over the past three years up to nine million Saudis, or half the population, joined in the new national pastime of playing the market in a conservative desert state whose strict brand of Islam outlaws standard forms of gambling.

They were encouraged by a government that hoped the bourse would enable citizens to share in the economic boom that has come with a rise in world oil prices not seen since the 1970s and iron out some of the country's huge disparities of wealth.

Now they are hesitant to return to the market and - in an ironic twist - say Saudi Arabia's ultra-rich have abused an initiative aimed at helping the less well-off.

"The psychology has changed. Now no one is interested in the market, no one is going to put their money back there so easily," says Abdullah, a photographer who lost 400,000 riyals ($107,000) since investing five months ago.

Hoping to buy himself a fancy villa, Abdullah borrowed money from a bank and then added some of his wife's savings to his own, before placing 500,000 riyals in last year's boom market.

"The market regulator is to blame. It should not have allowed the market to go up so far and to let these people manipulate it at will. Ordinary folks like me lost, and what fault is it of ours?" he told Reuters.

The government and its Capital Markets Authority (CMA) have blamed the crash on wealthy, sophisticated speculators who drove prices to record levels over the past year, then pulled out of the market en masse when the CMA tried to impose order.

Before, the media raved about teachers and pupils skipping class to track their stock options and mind their portfolios. Now, they relate tales of bankruptcy, reclaimed houses and heart attacks in trading rooms.

"It has been incredibly negative. Marital relations have been hurt, people have neglected their jobs," said sociologist Azza al-Mehdar. "I know many who gave up working just so they could give all their time to playing the bourse." In an authoritarian state with no tolerance of public protest or room for political expression, thousands of Saudis have turned to Internet chat rooms to vent their anger.

"What started as a correction ended as a major theft of defenceless people by a mafia committing cold-hearted robbery," columnist Khaled al-Majed said on one website this week.

"The stock market is creating a rupture in society that will not be easily fixed. We are a people heading for poverty. What do we imagine our situation will be when this boom is over?"

Though there has been no danger to the country's wider economic health, the government has had to be seen acting to counter the deep sense of injustice.

King Abdullah, whose media persona is of a modernising father figure, issued a decree last Sunday cutting domestic fuel prices by around 30 per cent. The CMA has vowed to "out" speculators and revolutionise the market information flow.

The government says its project to involve as many as possible in ownership of national firms is still on track.

"It's still alive and the state is still encouraging citizens into the market," said Abdullah Shamasi, editor of economic magazine al-Eqtisadiah. "Even the 'professional investors' lost millions of riyals. We can't say that the speculators gained and the small guy lost. Everyone lost." For one prominent cleric, though, some Saudis are paying the price for having let greed eclipse their devotion to God.

"It's shameful that some good Muslims became so preoccupied with commerce and shares that they missed daily prayers and would only open the Quran once a week on a Friday," Sheikh Ayedh al-Gurni was quoted as saying at a lecture this week.

Yet Sheikh Gurni - a influential person in Saudi Arabia - was careful to give his blessing to entering the bourse.

"Show me the way to market!" he said, citing a saying by a companion of the Prophet Mohammad.