The Kuwait Stock Exchange (KSE) crashed to a five-year low on Sunday on the back of the government's refusal to amend the multi-billion bad debt law and a drop in companies' second-quarter earnings.
The KSE index closed at 1,354.0 points, the lowest level since 1995, down 6.1 percent since the end of 1999, and a massive 52.3 percent on its all-time high in November 1997.
"The drop is down to the government's refusal to amend the bad debt law, of which the last instalment is due on September 6," Fawaz al-Ahmad, head of local investments at Kuwait and Middle East Financial Investments, told AFP.
The bad debt law stipulates methods by which hundreds of debtors, mostly big businessmen, can repay some 20 billion dollars in bad debt to local commercial banks. The debt was purchased by the government in 1992 by issuing treasury bonds.
Although the law lets debtors off more than 55 percent of the original debt without interest, influential debtors have been pressing for more government concessions amid opposition from MPs.
Ahmad said that a number of listed firms had also declared poor results for the second quarter which affected trading negatively.
Value of trading on Saturday and Sunday, the first two days of the week, was just over one million Kuwaiti dinars (KD) ($3.3 million), down from a daily average in May of more than KD 10 million ($33 million).
"It's a very strange market now. Even highly positive economic indicators like budget surplus, hike in oil prices and talk about reform are not affecting it," Ahmad said.
The KSE has shed 115.9 points or 7.9 percent since May 21 when it hit a year-high of 1,469.9 points.
Parliament voted in May to allow foreigners to own stocks and trade on the KSE, in what economists and MPs have dubbed an essential step for economic liberalisation, but no regulations have been issued.
Some 85 companies with market capitalisation of about 20 billion dollars are listed on the KSE, the second largest bourse in the Arab world after the NCFEI in Saudi Arabia.
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com )