Mid eastern investors accounted for more than half of all net purchases of U.S. common stocks by foreigners in 1976 and 1977, according to figures presented yesterday to the spring meeting of the Securties Industry Association.
In 1977, Mideastern money accounted for 19 percent of the $7.3 billion in total net equity purchases by institutions in this country, with foreigners as a group responsible for 36.5 percent of net institutional stock purchases. In 1976, Mideastern investors represented 14.8 percent of the $12.2 billion in net stock acquistions, out of a foreign total of 22.6 percent.
By contrast, in 1973 Mideastern interests represented only 0.4 percent of net stock purchases; in 1971, 6.1 percent; and in 1975, 14.5 percent.
The figures, "if anything, understate the importance" of Mideastern investment in U.S. equally markets, because they don't include instances where Swiss and British banks act as investment intermediaries, according to Alan F. Blanchard, a vice president of the Pershing division of Donaldson, Lufkin & jenrette Securities Corp. who included them in a presentation on the economic state of the securities industry.
The statistics seem to demonstrate that the Arab oil producers are becoming progressively less conservative in the way they invest their surplus oil revenues in this country, while assuming an increasingly important role as buyers in our stock market.
When multibillion dollar surpluses first began to accumulate in the wake of the fourfold increase in oil prices in late 1973, there was initial concern that a handful of Arab oil producers could buy out the shares of America's largest corporations in a few years. But, initially, the overwhelming proportion of the funds were placed in short-term savings instruments, and only a miniscule amount in equities, as the statistics indicate.
The presentation on "the state of the industry" to the SIA, which is the chief trade association for the country's brokers and investment bankers, emphasized:
The volatile pattern of profits and revenues over the last decade,
he declining return on capital in the securities business,
The increasing difficulty brokerage firms are having in attracting new capital, and
The growing concentration of business in a score of very large securities firms.
Blanchard said that despite the widespread assumption that the industry was in the red for the first quarter of 1978 because of the slide in the stock and bond markets, he had gotten some recent indications that broker were marginally in the black for the three months.
Of course, the boom in stock investment since the end of March has included repeated sessions with record breaking share turnover and provided the brokers with a comfortable profit cushion to face the rest of 1978.
Securities and Exchange Commission Roberts S. Karmel also addressed the opening session of the SIA meeting. She said she was "frankly worried that the SEC is not giving sufficient priority in its enforcement activities to the securities industry's compliance with the securities laws and regulations."
Karmel said the SEC may be neglecting its enforcement duties "because we are concentrating on how to fulfill our promotional mandates under the 1975 amendments" to the securities acts which give the commission broad responsibility in developing a national stock market system.
The commissioner said she was not suggesting "that our enforcement staff has gone soft on Wall Street."
But Karmel observed, "In the past few years the SEC has instituted proportionately fewer enforcement cases against broker-dealerw and other registered entities in the securities industry, such as investment companies and advisors, and proportionately more cases against issuers of securities."