BOURSA KUWAIT EX­PECTS WAVE OF IPOS AND HIGHER IN­FLOWS

Chief ex­ec­u­tive Khaled Al Khaled tar­gets two or three list­ings per year as the mar­ket evolves

The National - News - - BUSINESS - SARAH TOWNSEND

Kuwait’s stock ex­change, which will see two pub­lic of­fer­ings by year end, still in­tends to list in 2019 and ex­pects to record as much as 15 per cent more in cap­i­tal in­flows fol­low­ing its in­clu­sion in the FTSE Russell Emerg­ing Mar­ket in­dex, its chief ex­ec­u­tive said.

“The coun­try saw an in­flux of for­eign in­vestors even be­fore the in­clu­sion and now we are see­ing a lot of in­ter­est from in­ter­na­tional in­vestors who are con­tact­ing us and our lo­cal listed com­pa­nies … more fre­quently,” said Khaled Al Khaled of Boursa Kuwait.

It is too early to cal­cu­late the ex­act rise in flows since Septem­ber, and there is a sec­ond tranche of in­clu­sion in De­cem­ber, but the chief ex­ec­u­tive said gain­ing emerg­ing mar­ket sta­tus to­gether with cap­i­tal mar­ket re­forms Kuwait has been im­ple­ment­ing since 2016, will boost liq­uid­ity and en­cour­age more pub­lic list­ings.

“As the whole ecosys­tem of Boursa Kuwait [evolves], we ex­pect a liq­uid­ity in­crease of be­tween 10 to 15 per cent over 2019, and it will be even bet­ter in 2020,” he said.

Mr Al Khaled an­tic­i­pates two ini­tial pub­lic of­fer­ings of Kuwaiti com­pa­nies on Boursa Kuwait, the old­est mar­ket in the re­gion, be­fore the end of the year. They are util­i­ties provider Shamal Az­zour Al Oula Com­pany and a fi­nan­cial ser­vices com­pany he did not name.

The chief ex­ec­u­tive is tar­get­ing two or three list­ings per year as the stock mar­ket de­vel­ops – par­tic­u­larly Kuwaiti diver­si­fied fam­ily busi­nesses go­ing through a tran­si­tion pe­riod to their sec­ond or third gen­er­a­tion of lead­er­ship.

Boursa Kuwait was up­graded to FTSE Russell emerg­ing mar­ket sta­tus in Septem­ber in what an­a­lysts de­scribed as a “wa­ter­shed mo­ment” for Opec’s fifth-largest oil pro­ducer.

“Cap­i­tal mar­ket de­vel­op­ments like this make the re­gion dif­fi­cult to by­pass from an in­vestor point of view,” Salah Shamma, head of Mena in­vest­ment at Franklin Tem­ple­ton, said at the time. It pre­dicts an ad­di­tional $1 bil­lion (Dh2.6bn) of pas­sive in­flows as a re­sult.

Kuwait is in the midst of a five-year pro­gramme to bring its cap­i­tal mar­kets into line with global stan­dards and at­tract more for­eign in­vest­ment to the coun­try.

Among the re­forms made to date are seg­men­ta­tion of stocks ac­cord­ing to mar­ket cap­i­tal­i­sa­tion and liq­uid­ity since April, and pub­li­ca­tion of for­eign own­er­ship data for Kuwaiti banks for the first time – re­quired by in­dex providers to as­sess for­eign own­er­ship lim­its.

Forth­com­ing re­forms will see the in­tro­duc­tion of short-sell­ing (the sale of bor­rowed se­cu­ri­ties) on the ex­change, the list­ing of real es­tate in­vest­ment trusts, and a prod­uct called SLB (stock lend­ing and bor­row­ing), which are ex­pected in the first quar­ter of 2019.

From 2020, Boursa Kuwait will in­tro­duce de­riv­a­tives trad­ing and ex­change-traded funds. In the com­ing weeks, the bourse is launch­ing an over-the-counter stock mar­ket, in­tended to help prospec­tive listed com­pa­nies with “price dis­cov­ery” be­fore they de­cide to go pub­lic, Mr Al Khaled said.

It is hoped that the new plat­form will even­tu­ally in­clude one of the first ven­ture cap­i­tal ex­changes in the re­gion, to en­cour­age in­vest­ment in Kuwaiti start-ups.

The planned IPO of Boursa Kuwait is on track for the first quar­ter of 2019, led by Kuwait’s Cap­i­tal Mar­kets Au­thor­ity.

“We will be the first fully fledged pri­va­tised re­gional stock ex­change, 94 per cent owned by the peo­ple and pri­vate sec­tor,” Mr Al Khaled said.

Un­der the FTSE in­clu­sion, Kuwaiti stocks en­ter­ing the in­dex were given 50 per cent of their weight­ings in Septem­ber and the re­main­ing 50 per cent in De­cem­ber.

Kuwait will have a 0.51 per cent weight­ing in the in­dex.

Next year could bring fur­ther de­vel­op­ments, as in­dex provider MSCI will de­cide in June whether to re­clas­sify its Kuwait in­dex with emerg­ing-mar­ket sta­tus. An­a­lysts es­ti­mate such a move could trig­ger pas­sive fund in­flows of $2bn.

“We have in­tro­duced ex­tremely ma­jor changes in a short time since 2016, which peo­ple thought we could not do but we have proved to them we can,” Mr Al Khaled said.

AFP

Boursa Kuwait was in­cluded in the FTSE Russell emerg­ing mar­ket in­dex in Septem­ber. Be­low, ex­change CEO Khaled Al Khaled

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