DOHA: The capital flight from the emerging economies to the developed countries is expected to be $540bn by this year-end. This is the first time such a huge capital is shifting to the developed markets, after 1988, said an expert.
Delivering a public lecture on “the influence of foreign investors on Arab stock market” on Tuesday, Dr Elsayed Elsiety (pictured), Professor of finance at Faculty of Islamic Studies (QFIS), noted the massive exodus of foreign investors from the emerging markets to the developed economies will impact both small and big local investors in the respective emerging markets.
Foreign investors had a windfall earnings as they put in their money in the emerging markets when the prices were very low. Now, at a time when the value has hit the roof, they are taking profits out of the markets.
Earlier, talking to The Peninsula, Dr Elsayed suggested Arab countries should set certain conditions for foreign investors regarding the market exit. The unconditional market entry and exit of foreign investors will lead to the crash of local markets as was happened in the Asian markets like Malaysia, Singapore, South Korea and Thailand.
On the question of foreign investors leaving the emerging market, Dr Elsayed said that the fundamentals of developed markets are so strong and investors are bearish on Arab markets. They believe that Arab stock markets will not rebound to the 2008 levels in mid-term. For instance, American market is up 25 percent compared to the 2008 levels.
According to Dr Elsayed, the emerging markets are facing twin problems. First, the steep fall in oil prices; second foreign investors are increasingly exiting from these markets.
Arab countries are tax havens for foreign investors, and they are allowed to trade more than once in a single session. They are free to exit the market, whenever they want, he said.
