Kuwait Stock Exchange faces crippling challenges
Despite ending Monday's trading session at the green zone, the Kuwait Stock Exchange (KSE) still grapples with a series of crippling challenges to attract local and foreign investments and get revive, Kuwaiti economists have said. There is nothing new in Sunday's trading as the challenges have not been addressed yet, and even worsened," Saleh Saleh Al-Selmi, Vice Chairman and Deputy Chief Executive Officer of International Financial Advisors (IFA)-Kuwait, told KUNA.
This situation scared traders, especially small ones, away from the stock exchange," he warned. He noted that the lack of credit has gravely impacted the stock market. "The lack of credit is the main reason for the imbalance between the public and private sectors. The public sector is steadily growing as a result of external factors while the private sector is being marginalized," Al-Selmi said. He urged more support for the private sector instead of enhancing the public sector's control of Kuwait's economy. "I hope the Economic Advisory Committee would take necessary measures to help Kuwaiti economy," Al-Selmi said. Economist Nasser Al-Marri shared the same view with Al-Selmi. "The first session of trading after Eid Al-Fitr holiday has not seen anything new, as the problems facing the market still present due to the absence of clear mechanisms to liberalize the market which the government control is 90 percent of its components," told KUNA.
Al-Marri blamed the government's slow reaction to the global financial crisis of 2008 for the worsening situation on the local stock market. "It is unfair to blame the Capital Market Authority or the Kuwait Stock Exchange for what is happening in the stock market. Instead the blame is to be on the slow reaction and dealing with the impacts of the global financial crisis on all economic institutions, particularly investment companies" he said. He revealed that cash liquidity had been withdrawn from the Kuwaiti stock with the start of the global crisis after traders rush to sell their stocks and investment portfolios to repay banks dues. "The withdrawn liquidity did not return to the market again leaving it suffering from chronic cash liquidity shortage," Al-Marri suggested. Since then, the Kuwaiti market has been working with only a third of its capacity while banks are awash with liquidity." Al-Marri added that the stock market is also suffering from confidence crisis. "There is a need to take radical measures to address these challenges," he stressed.
He proposed a number of moves to help achieve this goal including facilitating credit for consumers whose spending are the main driver for the economy. "Banks' tightened lending measures have turned foreign investors away from the local market," he said. Al-Marri urged the government to acquire 20 to 25 percent of the operational companies and to pump KD10 billion on the market to lend companies and individuals to help revive the economy.
For his part, economist Adnan Al-Dulaimi, saw a kind of balance in Sunday trading session. "There was no huge difference in the market's main indices and 65 percent of the trading operations were on small shares," he said. "Focus on small shares has prompted purchasing actions as the shares' low prices have attracted small investors. Moreover, the blue chip stocks have performed well in the session.
Al-Dulaimi, however, said the market still needs incentives to help it recover. "All are waiting to see these incentives in the Economic Advisory Committee decisions," he concluded. The price index of Kuwait Stock Exchange (KSE) was green at Monday's session with a rise of 52.5 points, settling at 5,843.8 points upon closing. Meanwhile, the weighted index was up 3.25 points, reaching 405.51 points. Number of trades came to 1,515 valued at KD 9.1 million with volume of 105. 8 million shares.
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