Critical evaluation of financial markets Essay Example | Topics and Well Written Essays - 4750 words

Critical evaluation of financial markets - Essay Example As stated by Bolbol & Omran (2003) in their paper on stock market emergence in Arab countries, a change in the technology and output mix of the indigenous industries will require the stock markets to allocate the resources to the industries more efficiently. This is because stock market activities provide an effective way to check the performance of the new firms in the event of any opinion divergence in the manner it is managed. At present in the Arab countries there are stock exchanges in Egypt, Algeria, Jordan, Morocco, Lebanon, Tunisia, Sudan, Dubai, Bahrain Abu Dhabi, Oman, Qatar, Kuwait and Saudi Arabia. Among these countries it is said that the Arab stock markets are dominated by five countries in terms of active and large markets- Jordan, Egypt, Saudi Arabia, Morocco and Tunisia. On 3 June 2006 a resolution was passed in Libya which paved the way for the creation of the Libyan stock market, set up as â€Å"Syarika Musahima† with capital strength of LD20 million split i nto 2 million shares of 10LD per share. The headquarters as per Article 2 of the resolution was decided to be Tripoli with main branch to be set up in Benghazi. Levine & Zervos (1996) used a dataset of 47 nations for the period 1976 to 1993 to highlight that the stock market liquidity is an important predictor of real per capita gross GDP growth, physical growth in capital and growth rate in productivity. This highlights the importance of the establishment of Libyan Stock Market for the authorities in Libya1 The banking system in the country comprises four major banks which are either fully owned or in majority ownership of the Libyan Central Bank. This list of banks includes Wahda bank, Jamahiriya Bank, Umma Bank, Sahara Bank and National Commercial Bank. These banks comprise nearly 90 percent of the assets related to the Libyan banking sector. All these banks have capital strength of minimum 100 million Libyan Dinars with the two of these banks on the verge of privatisation. The f inance availability in the local market is frugal. The Libyan banks provide limited number of financial products, loans are granted based on personal rapport and the managers of the public banks do not seem to have any incentives in portfolio expansion. Scarcity of financing is a major deterrent in local development impeding the completion of the projects and the initiation of new projects. Presently the banking system in the country is undergoing a modernisation program to improve the existing products or services, handling of non-performing assets, promotion of the use of payments in modes other than cash and establishment of new accounting standards2 Reforms in Libyan Financial Sector The Libyan government is jointly working with reputed international organisations to facilitate improved transparency in the financial sector, chalking out plans to bring in international credit rating agencies in the country to evaluate the domestic financial instruments and the recently