Posted on February 25, 2011

As waves of change continue, Qatar exchange (QE) continues to be rocked by the waves of change.

Qatar exchange witnessed a noteworthy pattern this week as the percentage of change in index value reached -2.76% as of the 17th of February. It is expected that this week's report will witness a further decline in value.

However most investors in Qatar exchange attribute this change to the demonstrations that spread across the Middle East in recent months, one investor said: "The index is going down because of all the unrest that is happening in the area (the Middle East)".

And statistical patterns support the investors views; the index percentage of change reached -3.38% in two weeks during the turbulent times of the Egyptian revolution, where it was reported that thugs were roaming the country and stealing banks, shops as well as the Egyptian museum. The index than witnessed a rise by 2.15% in just one week, the one which ended with the resignation of former Egyptian president Hosni Mubarak. However the index then changed back to -2.75% of change in index value amid reports of escalating violence in Libya.

But when asked why would unrest in North Africa affect a stock market exchange in the Gulf, investors struggled to find the connection.

Attempts to find an answer to the question resumed to no avail until Sameh Samir, an investor, said: "It's about what you expect, you think this (a given stock) is going up you buy it. You fear another will drop so you sell it".

One reason that might explain the change in Qatar Exchange's market value is that the value is determined by the buyers' and sellers' expectations as much as any other factors. More importantly is that these expectations are likely to be irrational feelings such as fear rather than being based on an analytical approach.
In the case of Egypt, the fear that the Suez Canal would be closed and thus preventing economical activities between companies overseas is a possible reason to the change in Qatar Exchange's market value.
The Suez Canal is also an important gateway to the distribution of oil, whose  price also has a strong impact on the stock exchange's value according to Ali Hassan, another investor, and that, he adds, is what made the events in Libya relevant to stock exchanges worldwide.

In one of his speeches Libya's President Muammar Al Gaddafi, in a threat against the demonstrators, said he would burn all of Libya's oil. Something which would reflect on the price of oil worldwide immediately, even before Gaddafi made actions of his words.

The value of oil is determined in a similar fashion to that of a share in a stock exchange, oil is determined by both the current situation (the relation between the supply available and the demand where the greater the supply compared to the demand the lower the price, and vice versa.) as well as future expectation.

The world's current supply of oil is 88 million barrels a day according to the US Energy Information Administration, of which Libya produces around 1.5 million barrels a day. Burning that amount of oil would lead to a decrease in supply and an increase in the price of oil as a result.

The price of oil itself plays a large role in determining the value of the market's index, said yet another investor called Salah Hamed. Arguing that the increasing price of oil increases the expenses of companies, especially in transportation sectors according to Hamed, and that reduces their profit.

There are plenty of factors that drive a stock market's value up or down, but recent events in Egypt and Libya seem to have presented a valuable lesson to investors in QE; changes in countries that seem far away have a direct impact on our well-fare. As Ayman Shokry, an Egyptian Expatriate and investor, said: "I thought I left Egypt 20 years ago, but apparently it won't leave me alone".

source: Qatar News Agency