Extra CEO: Markets are uncertain, we anticipate three scenarios

Mohamed Galal, CEO of United Electronics Company (Extra), said that markets are experiencing unprecedented uncertainty in history, and therefore there is no benchmark against which to base it. However, several scenarios are possible. The first, and best for the markets, is that this is simply a matter of raising the ceiling on negotiations, with the situation later returning to a balance between countries with the aim of improving the trade balance and thus overcoming this problem.

According to Al Arabiya, Galal added that the second scenario is a trade war as is currently occurring, and we do not know how companies will deal with it.

He continued: “For example, Apple is making very large profits, and therefore it may reduce the features of its phones or take measures to absorb some of the increases it faces, so that it can maintain its production volume and not reduce it by 30 or 40%, because that would significantly increase costs and lead to an unusual market contraction. They will also not be able to raise prices by 50%.” Mohamed Galal said that no one knows how companies will react, especially those with a profit margin that allows them to take certain actions, and that this is part of the uncertainty they face.

He added: “In the short term, we don’t expect a major change, but it could be somewhat painful due to companies’ current inability to predict future production volumes. This could lead to disruptions in supply chains and production.”

The CEO of Extra explained that there are two types of companies: one type, like Apple, Samsung, and others, and the other type, smaller companies that deal with 80% of consumers at the high level. If production accumulates in China, it will have to be disposed of, and therefore, in the short term, prices may rise for major brands, but for other products, prices may fall significantly as a result of what resembles “deep discounts.”

In response to a question about the impact of customs duties on consumers in Saudi Arabia, he said: “If we go back to the global crisis of 2006-2008, we didn’t have similar problems in Saudi Arabia, but the market was affected during that period. When you hear all the negative news, it has an impact.” With the stock market recovering today, Mohamed Jalal said that many individual investors control the market in Saudi Arabia. When stock market losses occur, reflecting what’s happening globally, this will have a psychological impact on consumers and consumption, and may prolong the purchasing cycle.