Walk like a Kuwaiti

During October, the Kuwait Stock Exchange fell 23.7 percent. Understandably, investors aren’t happy about it. They’ve walked out at least three times, they’ve protested into front of the market building and, as a last ditch effort to convince Emir Sabah Al Ahmad Al Sabah to shut down the bourse until the financial storm blows over, they marched to the Emir’s palace. Naturally, guards wouldn’t let them in.

For weeks, Kuwaiti investors have demanded that their government not only close the stock market, but also shore up their losses. On October 23, demonstrators distributed leaflets accusing the government of providing funds to preferred investors “under the claim of supporting the market,” leaving small-time investors to shoulder the market’s losses. Some dealers even showed their medication to the media to illustrate that the market’s failure has made them physically weak.

But as badly as Kuwait’s stock market fared during October, other stock markets in the region suffered more losses: Dubai fell the hardest with a 28.7 percent drop, yet investors didn’t demonstrate in front of the DFM. But then again, demonstrations in Dubai are illegal.

The irony is that the very emotion driving Kuwaiti investors to stage ‘walk outs’ and march to the Emir’s palace, is the same emotion driving stock markets down globally. Trepidation, fear and uncertainty are pushing investors to abandon investments worldwide, bringing bourses to their knees. And in spite of the many assurances by governments in the Gulf that markets won’t be too affected by the global financial crisis, and that banks in the region will remain safe, regional investors have lost all confidence in the markets.

Needless to say, investor confidence can’t be predicted, which automatically translates into the following: you (Kuwaiti investors) cannot predict what happens in the stock markets precisely because you cannot predict human reactions to business deals and flops. Furthermore, the market losses today are indirect byproducts of the gains investors made in the past, both of which were driven by the same human emotions that prompt you to say things like: “Procedures need to be revised to stop this blood loss,” a statement made by Mohammad Al Atarah, the head of a Kuwaiti dealers’ organization.

Eventually, this crisis will pass. And like most downturns, there will be opportunities for investors to make their money back. But before they play the game again, they need to remember the following: the gains you make today may be the loss you suffer in the future. That’s the deal.