May 29, 2006: Al Qaeda got a boost in Saudi Arabia, from an unlikely direction, rapacious stock brokers. The value of stocks traded on the Saudi Arabian exchange reached an all-time peak (a bit over 20,000) on February 25th, and has since plunged about 50 percent. The crash was orchestrated by wealthy speculators, who bought shares in such a way as to drive the market up, then pulled out and triggered the crash.
Many civil servants, military officers, and professional people have taken a severe beating, and there have been petitions to the government for redress. There are four million stock holders in the kingdom, meaning that just about every family with assets was affected by the crash. Because Saudis are allowed to buy on margin (they can use half the value of their stocks as collateral to buy more stocks), the crash has wiped out, financially, over a million families in Saudi Arabia, and nearly as many elsewhere in the Gulf, where other markets suffered similar losses. In Saudi Arabia, banks are allowed to recover the stock loans via deductions from the borrowers salary. Thus, a lot of Saudis have gone from rich to "just-getting-by" in the space of a few months. One indicator of this is weddings, which tend to be spectacular affairs. Some 50 percent of the weddings planned for the next few months, have been cancelled.
The government had encouraged people to invest in the markets, so that more people could share in the prosperity brought about by the rise in oil prices. Now there is worry that Islamic radicals will benefit from the widespread ruin. Many Islamic preachers are blaming the crash with God's displeasure with all this interest in the stock market. Gambling is considered "un-Islamic" and is forbidden in the kingdom.
The government is under pressure to bring the speculators to justice, but many of the guilty are believed to have links to the royal family. Islamic radicals have long called for the overthrow of the Saudi royal family because it is corrupt and exploitative.
