Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (5527)	3/10/2006 2:59:59 PM
From: Peter Dierks	Respond to of 71588

Speed up sell off process or face market crash BY ISAAC JOHN (Chief Business Reporter) 27 February 2006 DUBAI — Warning of a market crash unless the governments of the GCC speed up privatisation, stock analysts said amid a big surge in new issues over the next two years, the region would witness a significant drop in demand per initial public offering (IPO) signalling the end to an era of phenomenal oversubscription. Market experts, analysing whether the current trend of high stock market growth continues or the bubble would burst, also urged regional governments to plan for potentially "huge" market corrections and called for the establishment of professional mechanisms to advise investors and prevent speculation disaster. Speaking at the 1st Middle East IPO Summit in Dubai, Mohammed H. Abudawood, Vice Chairman of Saudi Arabia's Abudawood Group of Companies, said public sector should start selling all held stocks to the public and at a faster pace. "This is called privatisation — it has to happen now. Governments are planning this. We are only asking for a faster pace." He said privatisation would allow the people to share this wealth. "Let's build a real middle class, no matter how small their ownership is — at least they are learning to invest and save, even if they are leveraging to own stocks." Abudawood said if governments in the region failed to act quickly, the consequences of "a huge market correction of say 30 per cent" would be serious. "These are political decisions with serious economic ramifications. You cannot afford a market crash. Shortsightedness is lethal," he warned. He said the private sector has to always demand more flexibility to allow growth and prosperity. "Additionally, we have to change the whole legislative process to allow business to have the freedom to get there. The immediate need is to change companies' law. We do not have to reinvent the wheel here. Countries all over the world have opened up their economies and given freedom to the private sector to do what is best for the economy." John Sandwick, Managing Director of Encore Management SA, Switzerland, the summit's chairman, warned delegates that GDP growth alone is not a sufficient indicator of economic well being. "It's not GDP growth that makes an economy great, but GDP growth combined with productivity growth, and while we're witnessing very strong GDP growth rates, we're witnessing only half a per cent productivity growth rates," he said. Dr Karim El Solh, CEO of UAE-based Gulf Capital, told delegates there will be 116 IPOs in the GCC within the next two years, up from 25 in 2005 and 12 in 2004. The average size of IPOs between 2006 and 2008 is expected to be $292 million, up from $248 million in 2005. Solh said he expects future IPOs in sectors not currently represented in GCC stock markets, including travel and tourism, transportation services, media and education. "Investors are asking for better opportunities in these sectors," he said. "116 IPOs will suck a lot of liquidity, but overall demand per IPO is bound to drop, oversubscription rates will fall and IPO performance will come back to reality," he added. "The boom will continue in IPOs. Only IPOs from the most solid companies with good growth momentum and sensible pricing will be successful. Gulf investors are becoming more discerning and support only quality IPOs. This is a healthy development and will ensure only the highest IPOs come to the market." khaleejtimes.com