The shadows of investors and speculators are seen cast on a screen as they monitor stock prices at the FALCOM investment bank in Riyadh August 5, 2014.REUTERS/Faisal Al Nasser
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Seventy-year-old Saudi Arabian stock speculator Mohammad al-Otaibi says he lost hundreds of thousands of dollars in the crash of 2006, but he's back trading again as the Arab world's biggest bourse prepares to open to direct foreign investment.The activities of Otaibi and many thousands like him mean there will be a clash of investment cultures when international institutions enter the $580 billion Saudi market early next year, under a plan announced by the regulator last month.Activity is dominated by about 4.3 million retail investors who buy stocks straight from the market rather than going through professional fund managers. These retail investors owned a little more than a third of shares at the end of 2013, according to Capital Market Authority data, but account for over 90 percent of daily trading volume.Small Saudi hospital firm Al-Hammadi, which listed on the market in mid-July after an initial public offer at a price of 28.0 riyals per share, is an example of how Saudi retail investors can bid stocks up.Assuming Al-Hammadi will post earnings per share of 2.58 riyals this year, twice its first-half earnings, that stock price valued it at a sky-high 39 times forward earnings.Then there is Otaibi's approach, which is shared by many retail investors.
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