Kuwait bull run may just be getting started

The Kuwait Stock Exchange Index has risen 12% this year

Kuwaiti stocks have started the year with a charge, performing better than any other market in the world in January. Investors expect the positive momentum to continue.

The Kuwait Stock Exchange Index has risen 12 per cent this year, more than double the advance in the MSCI Frontier Emerging Markets Index. There could be a further 20 per cent to climb, according to Ali Adou, a money manager at the National Investor in Abu Dhabi, who oversees the firm’s $20 million (Dh73.50 million) fund focused on the Middle East and North Africa.

Kuwaiti stocks advanced for a 12th day yesterday, the longest winning streak since September 2014. The volume of stocks traded surged to the highest in more than 3 1/2 years. Here are the main reasons investors are so bullish:

Market reforms

As Saudi Arabia and the UAE ready measures to make their markets more attractive, investors are betting that 2017 will see Kuwait’s Capital Markets Authority and the local bourse implement steps to boost inflows.

Rising oil

Kuwait, home to about 6 per cent of the world’s oil reserves, and its companies are set to benefit from higher crude prices, which should enable the government to step up spending. “The market is perhaps factoring in that the country can continue its capital spending,” said Chiradeep Ghosh, manager at Securities & Investment Co. in Manama, Bahrain.

Sovereign wealth

Local stocks could get an extra boost from the Kuwait Investment Authority, as the country’s sovereign wealth fund is known, as it expands holdings in domestic equities. The KIA wants to increase the allocation of funds managed in-house to as much as 8 per cent from 1 per cent or 2 per cent now, Managing Director Bader Al Saad said in an interview with Bloomberg Television on Wednesday.

Frontier funds

Starting in May, Kuwait will face less competition for frontier-market investments from Pakistan as the latter takes on emerging-market status.