Upgrading Boursa Kuwait to MSCI Index

Efforts of the “Capital Markets Authority”, “Boursa Kuwait”, and “Kuwait Clearing Company” continued to achieve continuing success in reconciling their conditions in accordance with the requirements of emerging markets. Boursa Kuwait was promoted to the ranks of those markets, previously on FTSE Russell and Standard & Poor’s, and currently on MSCI. Between May 2019 and December 2019, Boursa Kuwait along with its partners managed to fulfill the last two requirements of the MSCI Index before the deadline as they promised. By May 2020, Boursa will receive new indirect investments up to US$ 3.5 billion. The importance is not for the amount which would be invested in Boursa as it does not exceed 2.94% of its current market capitalization. Besides, Kuwait does not suffer from investors’ scarcity having excess liquidity. The importance rather comes from raising the level of regulation and transparency, and comes from supporting the confidence level that has been missing since the 2008 crisis and to the first Boursa upgrade.The need for confidence is not for the Premier Market companies that enjoy a high level of confidence as evidenced by 

obtaining about 80.9% of all Boursa liquidity from the beginning of this year until the end of last week and they achieved high gains for their prices. The Premier Market index gained about 31.5%. The need for trust is in its potential to extend to include the Main Market companies that, since the beginning of this year until December 26th, have only obtained 19.1% of the Boursa liquidity. That scarce liquidity assigned about 50% of the listed companies by about 1.1% of the Boursa liquidity. It is not required to call for pumping artificial liquidity to any company which raises the risk level but because more than half of the listed companies are sold by discount on their book value ranging between 30% -80% compared to their market values. Much is considered a promising investment opportunity.We believe that the three entities responsible for the Boursa need to complete their efforts to continue the filtering process for the listed companies. We believe that there are three due steps for further upgrading. The first is more audit for these companies’ financial statements in order to verify whether their shares’ book value is close to their fair value. The second step is not to be afraid of listed companies’ withdrawal; the purpose of listing is to achieve an acceptable level of the liquidity per share’ and unless that is achieved listing turns into a financial burden on the company and an unwanted surplus supply to the Boursa. What is needed here is to encourage the companies contemplating withdrawal to proceed with their decision. The third step is to encourage the establishment of public or private funds for the purpose of benefiting from the pressure on listed companies by buying controlling shares in them and restructure them financially and administratively to the interest of the Boursa in limiting the supply and improving the quality, and to the interest of the investor because they are profitable investments that need some money, patience, and some effort.