Tadawul Stock Exchange Market - Assignment Example

Teacher Internship Paper: Tadawul Stock Exchange Market Internships provide and young professionals with practical,real life experience in the discipline that they are studying. As a student that is greatly interested in banking and financing, my time at the Tadawul Stock Exchange Market in Saudi Arabia has enriched me greatly. While my duties were limited to a great degree, I was able to learn from working professionals currently demonstrate success in the field that I hope to enter one day soon. There are many purposes behind an internship, the primary of which is to give students a glimpse of what life is really like within the stock exchange, and the possible career options that are available should one choose to continue on their current path. Typically, students are paired with other working professionals within the organisation that help mentor and guide, as well as teach some of the inner-workings of the exchange itself. It is certainly designed to be an enriching part of the student career, and one which serves to further encapsulate the theoretical knowledge that has already been covered in a classroom setting. Currently, the Tadawul Stock Exchange is the only stock exchange operating in the Kingdom of Saudi Arabia. The Capital Market Authority of the country is responsibility for supervising all trading and investment activities associated with the Stock Exchange itself. The highest points achieved by the Tadawul All-Share Index was 20,634.86 reached back in February in 2006. As of the current moment, the Tadawul exchange publicly trades 156 companies from 11am to 3:30pm according the Islamic work week of Sunday to Thursday. The public trading of companies on the Saudi Stock Exchange actually began in the early 1980s, but Tadawul officially began trading on January 26, 1994 and has grown at a fairly steady rate during that entire time. The exchange itself was previously regulated by a Committee of Ministers within the country that was made up of the Ministry of Finance and National Economy, the Ministry of Commerce and Industry, and the Saudi Arabian Monetary Agency (SAMA). The Saudi Arabian Monetary Agency was actually the group within the government that was tasked with the responsibility of regulating and monitoring various market activities associated with the public trading of companies until the actual CMA was formally created and implemented back in July 2003 (Almahmoud 2014). This was made possible under the prevailing Capital Market Law at that time, and it was also during this period that the CMA officially became the regulator of the stock market, and the Saudi Stock Exchange became officially recognised as Tadawul, and it was to be the only official stock exchange in Saudi Arabia where individuals could trade in various security of the companies that were listed on the exchange. Under the financial structure inherent to Saudi Arabia, the CMA the government authority that is directly responsibly for reporting straight to the ministerial council appointed by the King. In addition, the Tadawul Stock Exchange Market has been given the legal status of being a joint-stock company, as set out the provisions of the Capital Market Law. Currently, the Tadawul Stock Exchange Market is the only financial entity permitted and authorised to openly execute the operation of trading securities within the Kingdom of Saudi Arabia. As such, the Tadawul is directly responsible for all activities related to the actual operation of the stock exchange, and they are required to detail its performance via a CMA report that is to be published annually (Budd 2012). Any issuer of a publicly traded security or investment is required to report any and all material announcements of important via the Tadawul Stock Exchange Market in order to be immediately published to all members of the Saudi public and the larger investment community. The Tadawul Stock Exchange Market also works to demonstrate a comprehensive range of data and key information through a variety of channels. Among these various channels are included the Tadawul website, that is to be continuously updated, and the Tadawul Information Link. In addition, the Tadawul Stock Exchange Market is responsible for the direct surveillance and monitoring of every key facet of the operation of the stock mark itself. All listed companies with Tadawul are eventually sorted according to the nature of their business, the main categories of which are divided into 15 different sectors. The table below illustrates each of the 15 sectors in the Tadawul Stock Exchange Market in Saudi Arabia, in addition the number of afflicted companies that are currently listed with the exchange itself (Budd 2012). Sector Number of Listed Companies Banks and Financial Services 11 Petrochemical Industries 13 Cement 8 Retail 9 Energy and Utilities 2 Agriculture and Food Industries 15 Telecommunication and Information Technology 4 Insurance 25 Multi-Investment 7 Industrial Investment 11 Building and Construction 14 Real Estate Development 7 Transport 4 Media and Publishing 3 Hotel and Tourism 2 TOTAL NUMBER OF COMPANIES 135 While serving as an intern at Tadawul, I performed various duties including the collecting of money from other companies that were investing in the stock market. Frequent telephone calls were made and received to take orders and to collect money from those that had placed buy orders, and facilitate the placing of any sell orders as well. Within my capacity as an internet, I worked have to provide and collect financial information to my respective managers and supervisors at the Exchange. Within this realm, I effectively serve to research and analysing various pieces of accounting data assembled for me, and prepared detailed reports as to what I uncovered that would be of possible importance to those that would receive the report. I also worked to research items in the following areas of interest to the management team I was assigned to: cash management, policy and strategy counselling for various investors interested in companies traded on the Tadawul Stock Exchange Market, and I prepared concise equity analysis reports. Finally, in the area of improving my critical thinking skills, I worked hard to recommend financial actions that should be further analysed by managers in terms of accounting options available to them. Through this internship, I also worked to further hone and develop my skills in the area of communication. To demonstrate this, in my role at Tadawul I was responsible for reporting the costs of various securities to investors in the Saudi Stock Exchange Market. Beyond this, I also work to provide answers related to questions related to accounting procedures that individuals within my domain asked of me. To effectively accomplish this objective, I worked on developing my knowledge in these areas by researching and interpreting accounting policy and regulations associated with investing activities falling under the scope of the Tadawul Stock Exchange Market. To develop my interpersonal skills, I also made effective of my internship at Tadawul. Within the scope of my duties at the stock exchange, I was responsible for collecting and managing a list of names and numbers associated with customers of Tadawul. With that information in two, I was responsible for the preparation of assigned special reports. I did this by collecting, analysing, and summarising key account information and trends related to customers and the public traded companies on the exchange. This served to also contribute immensely to my core business knowledge, so I am even more grateful for the opportunities that the internship provided me with. During my time at Tadawul, I worked with the investment department to comply with local financial and legal requirements related to operating within the public securities sector. This entailed my conducting an in-depth study of both existing and new legislation in the Saudi investment market, and working to help the management team enforce and adhere to the requirements by advising them about needed actions that they should take. This was a key function of the internship, as seeing and experiencing first hand the many regulations and policies I had only been reading about up to this point gave me valuable experience that simply cannot be replicated. I certainly feel that this will be helpful to me as I move in to a potential career in this sector. As an intern working in Saudi Arabia, I was especially interested in learning more about the impact that the Islamic work week has on the international investing climate of the nation. As the Stock Exchange in Saudi Arabia operates on a schedule of Sunday-Thursday, it is one of the only markets in the world officially open on Sundays and closed on Fridays. As an intern, my schedule adhered to this as well, so much of my research into international trading schemes and trends was limited in scope and often time delayed. Within my work, I undertook that additional task of studying more about the impact that the day of the week a market is open has on its ability to increase its indices (Heshmat 2012). It has been shown, for example, that the lowest volatility in the markets exists on Saturdays and Sundays, when most international exchanges are closed. Because of this, there is not enough activity taking place in the Saudi Stock Exchange to be of any significance, but the highest volatility exists on Wednesdays. The terminology of ‘day of the week’, I discovered during my internship, is of commonly discussed in most stock markets, and the one in Saudi Arabia is no exceptions. It is, “Defined as the situation when there are abnormally high stock market returns on Fridays followed be negative returns on the following Mondays without a specific cause” (Farooq, 2013, p, 1727). This was an important consideration in much of the research and analysis I conducted in my position as, given the reality that returns and risks are a part of the everyday life of the average investor, it is important to consider the days of week that contribute the highest levels of volatility within the Saudi market in order to better understand the mindset of the customer. While the highest volatilities is seen on Fridays, this does not impact the Saudi market because it is closed. The exclusion of foreign investors from being able to invest in the Saudi Stock Exchange Market on Fridays may also deter local investors from executing trades as well (Basuony 2014). This effectively served to lower the volatility seen on the weekends, which leads to the evidence that the highest volatility occurs on Wednesdays, both in terms of international markets and the Saudi investing climate as well. This is likely due to the fact that Wednesday signifies the beginning of four non-trading days for most foreign investors. Face with this long of a closure, foreign investors leave the market on Wednesdays, which often causes excess trading to take place on that day (Alzahrani 2012). This was proven correct by my observations that Wednesdays were by far the busiest day of the week in terms of taking buy and sell orders from customers throughout the Kingdom. As an intern, I learned the value of becoming a results oriented person that moves beyond mere theoretical knowledge and is able to put sound investment principles into practice through concise and accurate research. This experience will certainly be extremely valuable to me as I work towards building my own career. Through this internship, I learned to further develop my work related skills, in addition to having the opportunity to explore and validate my own desires to pursue potential career opportunities in this field. Also, the networking opportunities that interning at the Tadawul Stock Exchange Market in Saudi Arabia are enormously helpful. I worked alongside some seasoned veterans in the investment field that taught me skills necessarily to effective research and interact with prospective investors in a knowledgeable, informed, and professional manner (Almudhaf 2013). This internship also enabled to see many different facets of the overall operation of a major international stock exchange market. This included areas of technology, corporate developments and finance, clearing, marketing, products and services, and operations and Human Resources. While much of my time was spend analysing reports and synthesising information to review with customers, having a cursory overview of these other key areas has only served to further enhance my knowledge in this field, enabling be to feel better prepared as I hopefully enter the profession myself in the near future. I not only gained valuable investment oriented experience, in addition to exposure to international financial markets, but I was able to experience first had what a trading floor was like and how international trades are now executed with the use of modern technology. Once again, this is practical knowledge that cannot always be effectively ascertained in the physical classroom environment alone. In the end, this position required me to work harder than I ever have before in order to complete the tasks assigned to me by the managers and supervisors that I was assigned to. The international investing community is expanding rapidly. The Saudi stock market might be relatively small in comparison to the London, New York, and Tokyo exchanges, but that does not negate the reality that we now live in a truly global investing community (Alnajjar 2013). The experience that I gained through the internship helped me to realise the importance of accurate and timely information in order to make effective trades on the open market. As an employee of such a company in the future, I now fully understand and comprehend that my customers will depend on the reports that I work to generate and the information that I disseminate in order to make their final investment decisions (Alrasheedi & Alghamdi 2014). I will continue to work to hone my skills and look for opportunities to further refine my knowledge in this area so that I will be an effective asset to now only the publicly traded companies on the exchange, but to my customers as well. Works Cited Almahmoud, Abdulaziz. “Country Risk Ratings and Stock Market Movements: Evidence from Emerging Economy”. International Journal of Economics and Finance, 6.10 (2014): 88- 96. Almudhaf, Fahad. “Are Civets Stock Markets Predictable?”. Academy of Accounting and Financial Studies Journal, 17.3 (2013): 1. Alnajjar, Mohd. “Behavioral Inferences of Tadawul Investor”. International Journal of Business and Management, 8.24 (2013): 17. Alrasheedi, M. and Alghamdi, A. “Comparison of Classification Methods for Predicting the Movement Direction of Saudi Stock Exchange Index”. Journal of Applied Sciences, 14.16 (2014): 1883-1888. Alzahrani, Ahmed. “Can Market Frictions Really Explain the Price Impact Asymmetry of Block Trades?: Evidence from the Saudi Stock Market”. Emerging Markets Review, 13.2 (2012): 202-209. Basuony, Mohamed. “Internet financial disclosure: Evidence from Saudi Arabia and Oman”. Accounting and Taxation, 6.2 (2014): 59. Budd, Bruce. “A Random Walk Through the Saudi Arabian Financial Market- Is the Tadawul Efficient?”. Journal of Finance and Accountancy, 10.6 (2012): 1. Budd, Bruce. “Saudi Arabian Commercial Banks Market Risk Sensitivity: A View Through Rolling Sub-Samples”. Asian Economic and Financial Review, 2.4 (2012): 523-537. Farooq, Omar. “Day of the Week and its Effect on Stock Market Volatility: Evidence from and Emerging Market.” Journal of Applied Business Research, 29.6 (2013): 1727. Heshmat, Neshma Ahmed. “Analysis of the Capital Asset Pricing Model in the Saudi Stock Market”. International Journal of Management, 29.2 (2012): 504. Read More