By: Mohamed Farouk
Mubasher: The Kuwaiti economy has been witnessing massive changes and leaps lately, with the Ministry of Commerce and Industry issuing a decision on Saturday to raise foreign ownership in banking stock to 100% from 49%.
The decision aims to facilitate investment by non-Kuwaitis on Boursa Kuwait, the ministry had said in a statement, indicating that decision would also attract foreign investors. The decision comes ahead of a widely anticipate index upgrade on FTSE Russell towards the end of December as well as an upgrade on the Morgan Stanley due in May 2019.
Mubasher survey
A survey launched by Mubasher via Twitter indicated that 72% of participants expect the ministry’s decision to have a positive impact, which 13% were not optimistic about the decision and 15% expected the decision to have no change on investment.
Analysts
Speaking to Mubasher, several analysts agreed that the ministry’s move was a positive one that would prompt further investments, up to $3 billion, in the Kuwaiti banking sector, alongside expectations that the Kuwaiti bourse would be upgraded on the Morgan Stanley index (MSCI) in May 2019 added to the FTSE Russell upgrade towards the end of December 2018.
Raising foreigners’ ownership in banking stocks was among the requirements of the MSCI upgrade, said Mohamed Mane’ Al-Ajami, stressing that the decision would not have an immediate effect but will generally improve Boursa Kuwait’s liquidity on the long-term, especially if the bourse is indeed upgraded on MSCI.
Meanwhile, analyst Ahmed Jassim Al-Qamar, who described the step as positive, said that the Kuwaiti ministry’s decision would prompt over $360 million in foreign investments in banking stocks.
Investors are likely to pump around $900 million in additional investments if Kuwait is upgraded on the MSCI index next year, Al-Qamar told Mubasher, noting that combined, this would mean around $1.26 billion in investments in the Kuwaiti bourse.
Banks’ benefits
Kuwaiti banks will benefit from the ministry’s recent decision, however, the benefit level will differ from one bank to another based on the level of trading and the weighted average for each bank on the bourse, according to market analyst Mohamed El-Deeb.
The National Bank of Kuwait (NBK) will see the highest benefit, the analyst told Mubasher.
As of Thursday, 13 December, foreigners held 9.7% of NBK’s shares, making it the highest bank in terms of foreign ownership in the bourse. Kuwait International Bank (KIB) ranked second with 6.8% held by non-Kuwaiti, while Kuwait Finance House (KFH) ranked third with 4.9%, data released by Boursa Kuwait showed.
Analysts Nawaf Al-Oun and Mohamed Sidiqi also described the decision as a good one, which would attract investments to the Kuwaiti bourse.
