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‘Can’t blame stock market for decline in share prices’ Govt impetus to boost activity

Many people have recently criticized the Kuwait Stock Market Authority because they consider it a key reason for the fall in share prices on the Kuwait bourse over the past few days. They also accuse the authority and the officials running it for the downward trend. Nonetheless, the Kuwait Stock Market Authority is not fully responsible for the downward trend of the bourse index since its task is only administrative.

The market activity depends wholly on supply and demand. The decrease or increase in price of shares in the market is probable so it is unreasonable to hold the authority responsible for the loss which was founded just recently. Many of those who follow the trend at the Kuwaiti bourse fully know that the fall in prices of stocks is not strange. It is a global phenomenon. Moreover, it is a result of several factors - the role played by the market, portfolios, market movements, etc. Unfortunately, we rarely find anyone praising the market administration or the bourse when the business is good.

The one who deals with the market realizes that the market has followed the same trend over the years, since the Kuwait market does not depend much on the financial or technical analyses. It depends solely on news, political incidents or even when investment bargains for possessing shares or selling them or when big investors exchange roles to lead the market. Small investors are attracted by any stock market because they represent the society’s interaction particularly the middle class which makes the core of the stock market.

The absence of the role of portfolios and funds which are supposed to protect the small investors is one of the obvious phenomena in the bourse. Those small investors are considered profit making tools to benefit from. You rarely find a small investor making profits while speculating with his shares. The Kuwait Stock Market Authority is now requested to investigate the budgets of the companies which are listed on the bourse to know which company needs to increase or decrease its capital to suspend some negative practices. This is actually the basic task of the authority to enable the investor to review correct information officially before taking a decision to buy or sell shares on the market.

The Kuwaiti market has all reasons and factors for having power. However, the Kuwait Stock Market Authority cannot afford the responsibility of any decrease or increase of shares. Yet, it may shoulder part of the administrative responsibilities but the big responsibility falls on investment groups which run portfolios and funds in the market. In addition, they run the market in line with their plans and ambitions but this is not noticeable by the watchdog. The notices posted at the Kuwait Stock Market Authority are administrative in nature. However, it is obvious some individuals do not like the decisions taken by the authority and this is evident based on response from individuals who are all small investors who can ill afford to be in conflict with the big investors, who are definitely the victims.

The Kuwaiti market is promising and is distinguished by the authority which is not affiliated to the whims and desires of any person. The stock market is sensitive and gets influenced by simple political or security rumors. The responsibility of the authority is to run the bourse and clear dealing. It must shun rumors that may influence trading. It has to issue immediate statements to refute rumors concerning any company and for this it should establish a center for rapid information and link it electronically to the administration of companies listed on the bourse to underpin the credibility and professionalism of the market.

In spite of the political and security stability enjoyed by our country — thanks to a stable ruling regime and steady economy supported by high oil prices and strong currency - negligence, if any, is the responsibility of those who trade daily on the market. Nonetheless, it is common responsibility. The government has investment groups which are responsible for decision making indirectly such as portfolios and funds of the Kuwait Investment Authority and the Public Institution for Social Security that can have a positive influence on the running of the market unless the investors take up this role.

If the government activates its power properly in public interest, the position of the market will be certainly excellent. Indisputably, speculating in the market movement makes a winner or a loser. However, it is not reasonable to accuse the authority for fall in shares. It is not proper to put pressures on it in an irresponsible manner to force the authority to take decisions in line with personal whims.

By Yousef Awadh

By: Yousef Awadh

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