Kuwait Trounces Gulf Peers Becoming New Preference of Global Leaders

Kuwait’s stock market had been lagging behind most of its bigger neighbors in the Gulf. Although once overshadowed the market has now emerged as the new preference of the global investors.

Since MSCI said in June that it might announce the upgrade of the nation to emerging-market status next year, the country’s stocks have trounced most of their Persian Gulf peers, joining the ranks of Qatar, Saudi Arabia and the United Arab Emirates (UAE).

On September 24, Kuwait won inclusion to the emerging-market benchmarks of FTSE Russell, an attempt by the market regulator to boost liquidity and attract international interest pay off. Ahead of this accession money is already flowing in Kuwait.

A portfolio manager at Eaton Vance, Marshall Stocker said, “Overtaken by the UAE when it comes to economic freedom, and in the shadow of Saudi Arabia’s now-accessible equity market, Kuwait capital markets have been long neglected by investors and Kuwaiti policy makers.

We are invested in Kuwait for an incipient policy liberalization story, one that is admittedly taking quite a while to unfold but is happening if you pull out your looking glass.”

By the end of 2017, Kuwait ranked 96 in the World Bank’s index for the ease of doing business. On the other hand, UAE was at 21, while Saudi placed 92 in the World Bank list.

With a goal to stir international interest in one of the oldest stock markets in Kuwait, authorities started taking several measures in the previous year to update infrastructure for equities trading.

In April, the stocks were segregated on the criterion basis, such as market value and unveiled new indexes, including a premier market comprising of the largest and most liquid companies in Kuwait.

Still, the country’s market value of $85 billion amounts to less than one-fifth of Saudi Arabia’s and is 65 per cent lower than Dubai and Abu Dhabi collectively.

Stocker at Eaton Vance said, “Kuwait is a refuge which is becoming more attractive as economic liberalisation ideas increasingly capture the minds of policy makers and investors. Now it’s time for ideas to become actions.”
He said that Kuwait’s pegged currency also shields its assets and consumers from the recent emerging-market sell-off.

Since MSCI’s June 20 announcement, the key Kuwait stock index has climbed 10 per cent. Whereas, benchmark for Saudi Arabia has dropped about 6 per cent in the period. Overall, developing-nation equities have fallen more than 6 per cent.

On Sunday, the Kuwaiti gauge advanced 0.3 per cent, while the Saudi benchmark fell 0.4 per cent.
In the first half of this year, beating the Kuwaiti gain more than sixfold, Saudi Arabia’s stock market was among the global best performers.

M R Raghu, the head of research at Kuwait Financial Centre SAK, which manages more than US$3 billion, said, “Given that only FTSE has announced Kuwait’s inclusion into its emerging-market index so far, there is potential for a strong rally if MSCI confirms Kuwait’s inclusion into its EM index.”

He added that in addition to its high oil reserves, a “sound banking system” should make Kuwait’s equities attractive, he added.

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