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Finance & Banking | Global Arab Network
Emotion crowds out substance in TV stock reporting
Global Arab Network - Dr Mohamed Ramady
Dubai_Financial_Market__-_Foreign_investors_sell_more_than_they_buy
Television presenters are human too and can be excused if they sometimes show emotion when under stress, but it becomes inexcusable when personal emotion is constantly flaunted in financial news coverage, particularly in the daily reportage on the Gulf’s yo-yo stock prices.

The growth in Arabic satellite stations, each trying to compete in a tight market, has made some high-profile channels turn to almost non-stop daily coverage of national stock markets, helping to feed the habit of those obsessed with these markets. Again this can be acceptable if the incessant commentary provides guidance and neutral explanations on how the markets are performing, especially to individual Gulf investors, the majority of who could not differentiate between price earning ratios and body mass indexes.

World markets undoubtedly do have a knock-on effect on regional bourses, as the blanket of red screens indicated when the recent poorer-than-expected US economic data dragged down local markets along with distant ones. There is also another element that is peculiar to the Gulf markets which seems to be driven in part by the unconscious signals of financial commentators at Arab satellite stations.

While nervous profit-taking is to be expected following sharp and inexplicable rallies of the Saudi and other Gulf markets over the past few months, it is the opinions or, to be more precise, the cheerleader roles of the commentators that is part of the problem.

Objective reporting seems to give way to emotional analysis and that becomes a matter of concern when presenters start using subjective expressions of either misery or joy, depending on whether the local market is in the red or the green.

Again, we do not expect our expert analysts to be wooden dummies, but too often their body language, spluttering and faltering analysis, coupled with anguished facial expressions reveal all, especially when the markets are “doing badly”. Equally unbounded joy, glee and much laughter greets sharp rallies, with some presenters even congratulating each other on another fine “green “day.

This can be partly explained by an Arab culture and psyche of empathy and acceptable expression of emotion. One certainly expects a certain measure of sympathy to be expressed in times of acute financial crises or panic market falls, as investors or speculators often suffer enormously.

What makes it somewhat painful is that presenters seem unable to accept corrections in market rallies as such, but seem to view them as aberrations from the relentless upwards march of regional stock indexes.

Even hot air balloons have to come down to earth sometimes.

This type of market hype is sheer fallacy, especially in developing markets that still have no depth in terms of both the number of listed shares and wider economic or sectoral diversification.

Instead of analysing flaws of the current composite market structure and highlighting the huge difference between long term investment and the daily doses of speculative mania, the assorted TV analysts are bent on rolling out any scrap of good news, and thus unwittingly cheering on speculators. Even “bad” corporate or economic news is dressed up as semi-good, when in brutal reality free falls and long overdue corrections are occurring.

This unwitting cheerleader role could raise questions of potential conflicts of interest if rumours spread that some TV analysts and commentators have an interest in some of these stocks or are being prompted to “talk up” some flagging issues.

Gulf markets are still emerging in terms of investor sophistication and many participants have a short term outlook. With such a limited horizon, they are often driven by periods of irrational exuberance only to be followed by panic selling when all fundamentals point to the opposite. Such speculators are not interested in long term stock investment, but have become unwitting experts at “picking up” body language signals, voice tremors and facial expressions.

Who wants to bother analysing corporate financial trends after such a public show? The difference with the majority of western individual investors could not be more striking.

In the developed economies, many investors pick stocks and stick with them over the long term horizon. Compared with the daily fix of how the stock market is doing in the Gulf, few people get so uptight in the West, simply because there is no wall-to-wall analysis of the stock markets on regular TV channels. Specialised investors turn to Bloomberg or other outlets for information.

For the western investor who wishes to indulge in a bit of speculative gambling, there are the more traditional outlets, but in the Gulf, in lieu of such illegal outlets, the national stock markets have to do.

Unfortunately, with a few honourable exceptions and until more professional and transparent TV financial reporting emerges in the Gulf, some of us will continue to predict how markets perform, not based on economic fundamentals or technical analysis, but on the colour of the clothes worn and the personal demeanour of our favourite TV personality.

Global Arab Network

Dr Mohamed Ramady is a former banker and is a Visiting Associate Professor of Finance and Economics at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia. This article first appears in The National on Sunday, November 15th 2009
 

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