BEHIND BLUE CHIPS
In a tumultuous year on Kuwait's trading floors, blue-chip stocks emerged as stable investments despite a liquidity crunch that laid bare the structural reforms needed to maintain high liquidity levels.
The tremendous bearing of Kuwait's banking and financial services segment recently came to the fore, when the Boursa Kuwait Securities Company (BKSC), the licensed operator of the Kuwait Stock Exchange (KSE), released its annual report. In 2016, Kuwait's banking sector accounted for the highest-valued number of traded stocks at KWD985 million, while trading in financial services' stocks ranked second at nearly KWD570 million. It should, therefore, come as no surprise that blue-chip stocks evolved as the protagonists in the recently privatized KSE's “game of trades” in 2016.
Over the past year, the privatization of the KSE was completed, as the newly established BKSC not only took over operations in April, but also became a licensed independent stock market in October. In spite of these institutional leaps forward, the KSE has nonetheless seen a fall in trading volumes of nearly 15 billion shares compared to 2015. This was mainly due to portfolio investors refraining from trading activities over the year, which continued a crunch in liquidity. Even though the highest valued blue chips of the National Bank of Kuwait (capitalized at KWD3.37 billion) and Kuwait Finance House (capitalized at KWD2.69 billion) remained stable for most of the year, a food company turned out to boost investors' confidence again in 3Q2016, raising liquidity in Kuwait's capital markets, with UAE-based Adeptio eventually buying a majority stake in Kuwait's food conglomerate flagship Americana Group (capitalized at KWD1.04 billion).
Although low oil prices also contributed to an overall decline in trading activities across the GCC in 2016, the current setup of Kuwait's capital markets not only undermines blue chips' performance, but further casts doubt on how profitable IPOs are for SMEs. For example, the 2014 capital market reforms now require listed companies to be audited by two firms and also increased the costs for going public. In light of macroeconomic downward movement, various smaller companies consequently decided to delist from the KSE, which had an adverse impact on the stock exchange as a trading hub. This downward spiral was particularly reflected in a recent report by market research firm almowazi.com, which outlined that five companies delisted from the stock exchange during the first half of 2016, while four were currently in the process of delisting in addition to another five that already gained preliminary approval.
In October 2016, however, Kuwait's sovereign wealth fund, the Kuwait Investment Authority (KIA), raised liquidity by KWD100 million, opting for small and medium chips. In return, this led to record-breaking buying of small caps during the first fiscal quarter of 2017. In order to maintain high trading activities and liquidity levels in the long run, Khaled Abdulrazzaq Al-Khaled, the Vice-Chairman & CEO of the BKSC, told TBY: “We are going to have a market maker introduced by the end of this year, and will introduce SLBs and short selling. We will also collaborate with the Kuwait Clearing Company (KCC) to introduce derivatives and options. In addition, we are going to enhance over-the-counter performance, which is a market nobody focuses on in the region, and later, we are going to focus on SMEs, which are a key part of the economy, especially in relation to diversification.”
At the same time, the Central Bank of Kuwait (CBK) introduced new regulatory procedures to ensure that liquidity levels do not only remain high, but also improve the efficiency of Kuwait's capital markets as such: Having introduced supplemental capital requirements and buffers for blue-chip companies, the CBK further hopes to stabilize the funding structures through new liquidity standards. This further entails an enhancement of the CBK's sharia supervisory activities—reforms that are particularly crucial in view of the unparalleled growth of the Islamic banking industry as a whole.
BEHIND BLUE CHIPS
TABLE OF CONTENTS
Guest Speaker
Dato’ Sri Haji Mohammad Najib bin Tun Haji Abdul Razak, Prime Minister , Malaysia
TBY talks to Dato' Sri Haji Mohammad Najib bin Tun Haji Abdul Razak, Prime Minister of Malaysia, on the growing contribution that Islamic countries are making to the global economy and how Islamic financing can offer new opportunities to industry and academia.
read articleInterview
HE Khaled Nasser Abdullah Al-Roudan, Minister, Commerce and Industry (MoCI)
TBY talks to HE Khaled Nasser Abdullah Al-Roudan, Minister of Commerce and Industry (MoCI), on tools and strategies for diversifying the economy, the role of international players in supporting a wider range of sectors, and the rapidly developing food industry.
read articleInterview
HE Yousef Al-Ebraheem, Advisor , Al-Diwan Al-Amiri
TBY talks to HE Yousef Al-Ebraheem, Economic Advisor to the Al-Diwan Al-Amiri, on the need for a rejuvenation of Kuwait's infrastructure to support an economy that has come a long way and the role education will play in delivering the expertise required by the society.
read articleInterview
Dr. Khaled A. Mahdi, Secretary-General , Supreme Council for Planning & Development (GSSCPD)
TBY talks to Dr. Khaled A. Mahdi, Secretary General of the Supreme Council for Planning & Development (GSSCPD), on the breakdown of Kuwait's long-term economic plan, the KPIs that will benchmark its success, and what Vision 2035 means for the nature of the economy.
read articleInterview
Sheikh Dr. Meshaal Jaber Al Ahmed Al Sabah, Director General, Kuwait Direct Investment Promotion Authority (KDIPA)
TBY talks to Sheikh Dr. Meshaal Jaber Al Ahmed Al Sabah, Director General of the Kuwait Direct Investment Promotion Authority (KDIPA), on launching an investment promotion conference, attracting the right partners for PPP, and expectations for the year ahead.
read articleInterview
HE Dr. Mohammad M. Al-Zuhair, Executive Chairman, Kuwait National Fund for Small and Medium Enterprise Development
TBY talks to HE Dr. Mohammad M. Al-Zuhair, Executive Chairman of the Kuwait National Fund for Small and Medium Enterprise Development, on empowering young Kuwaitis, IT and entrepreneurialism, and the growth of fintech.
read articleFocus: Still all in the family?
Merchant families in Kuwait
Family-owned businesses play a major role in the Kuwaiti economy. However, with many approaching the third generation of management, they are starting to come across unique problems that may pose issues for the greater economy.
read articleInterview
HE Sheikh Abdullah Ahmad Al-Humoud Al-Sabah, Director, Environmental Public Authority (EPA)
TBY talks to HE Sheikh Abdullah Ahmad Al-Humoud Al-Sabah, Director of Environmental Public Authority (EPA), on how oil companies can contribute to Kuwait's vision on sustainability and the various projects that are coming to fruition.
read articleInterview
Dr. Samira S. Omar Asem, Director General, Kuwait Institute for Scientific Research (KISR)
TBY talks to Dr. Samira S. Omar Asem, Director General of the Kuwait Institute for Scientific Research (KISR), on commercializing the green innovations coming from R&D initiatives, the role of collaboration across multiple sectors, and projects that we should expect to see more of in the future.
read articleInterview
Khaled Abdulrazzaq Al Khaled, Vice-Chairman and CEO, Boursa Kuwait Company
TBY talks to Khaled Abdulrazzaq Al Khaled, Vice-Chairman and CEO of Boursa Kuwait Company, on the takeover of the Kuwait Stock Exchange and the role the bourse plays in both the privatization of government entities and as a source of capital for family businesses.
read articleInterview
HE Essam Abdul Mohsen Al-Marzouq, Minister, Oil & Minister of Electricity and Water
TBY talks to HE Essam Abdul Mohsen Al-Marzouq, Minister of Oil & Minister of Electricity and Water, on cooperation with other ministries, the private sector's role in energy, and upcoming regulations.
read articleInterview
Ghalib Shlash Safouq, Assistant Undersecretary for the Construction Projects Sector, Ministry of Public Works
TBY talks to Ghalib Shlash Safouq, Assistant Undersecretary for the Construction Projects Sector at the Ministry of Public Works, on Kuwaiti companies, the country's healthcare facilities, and the role of international companies.
read articleInterview
Khaled K. Al Mashaan, Vice-Chairman & CEO, ALARGAN International Real Estate Company
TBY talks to Khaled K. Al Mashaan, Vice-Chairman & CEO of ALARGAN International Real Estate Company, on drivers of growth, operating throughout the region, and real estate prices in Kuwait.
read articleInterview
Tawfiq Ahmed Bin Sultan, Chairman, Middle East Telecommunications Company (METCO)
TBY talks to Tawfiq Ahmed Bin Sultan, Chairman of the Middle East Telecommunications Company (METCO), on e-government potential, the future of the economy, and the state of technology uptake in Kuwait.
read articleInterview
Sheikh Yousef Abdullah Sabah Al-Nasser Al-Sabah, Director General, Kuwait Ports Authority (KPA)
TBY talks to Sheikh Yousef Abdullah Sabah Al-Nasser Al-Sabah, Director General of Kuwait Ports Authority (KPA), on his operational plans for the near future and turning Kuwait into a regional logistics hub.
read articleInterview
HE Khaled Nasser Abdullah Al-Roudan, Acting Minister, State for Youth Affairs
TBY talks to HE Khaled Nasser Abdullah Al-Roudan, Acting Minister of State for Youth Affairs, on e-platforms and blended learning programs, developing ICT skills, and preparing young people for tomorrow.
read articleInterview
Eng. Ali Hussein Al Youha, Secretary-General, National Council for Culture, Arts and Letters
TBY talks to Eng. Ali Hussein Al Youha, Secretary-General of the National Council for Culture, Arts and Letters, on the activities of the Council and works to preserve and enhance Kuwait's cultural heritage.
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