Sunday , January 21 2018

Boursa Kuwait preparing for market segmentation – Move to raise liquidity

KUWAIT CITY, Dec 11: Taking another step towards strengthening its position on both regional and international levels and adding a new achievement to its track record, Boursa Kuwait has announced its plans for the Market Segmentation, which divides the market into three segments: Premier Market, Main Market and Auction Market. This major accomplishment will lead to a substantial leap in enhancing the conditions of the market and increasing liquidity.

In preparation, Boursa Kuwait is applying major changes to its infrastructure and conducting tests with relevant stakeholders before it officially launches the market segmentation.

The new market segments aim to remedy two major problems facing the current market, the lack of liquidity and the unattractive issuer’s base, by providing an attractive investment platform that helps increasing the percentage of traded shares in the market.

The new basis of segmentation will be based on certain criteria related to liquidity, market capitalization, price to par ratio, years of operations plus disclosure and compliance with the terms and conditions of listing.

Primer Market

“Primer Market” forms the elite category, which will be occupied by high calibre companies with high liquidity and medium to large market capitalization requirements. Companies in this segment are subject to annual reviews to prove its powerful performance throughout the year to be able to remain in the segment it falls under or to be re-classified to either the “Main Market” or “Auction Market”.

Also, “Premier Market” listed companies are requested to hold quarterly analyst conferences and are required to disclose in both Arabic and English. Companies classified under the “Premier Market” are among the Premier Market index and the All-Share index.

Main Market

Companies which are not qualified for the “Premier Market” category will be classified under the “Main Market”, those companies need to maintain minimum level of liquidity in accordance with all basic requirements for the “Main Market”.

Companies in this segment are subject to annual reviews to prove its performance throughout the year to be able to remain in the segment it falls under or to be re-classified to the other segments.

Companies classified under the “Main Market” category are among the Main Market index and the All-Share index.

Auction Market

The “Auction Market” will include companies with low liquidity regardless of its market capitalization. Companies in the “Auction Market” will not be part of any index. Trading in the “Auction Market” will trade following an auction trading mechanism with no continuous trading.

Market segmentation is a common practice worldwide, many reputable world exchanges such as the London Stock Exchange, Deutsche Börse and NASDAQ have similar markets and have benefited from it.

Since established, Boursa Kuwait has recorded a lot of achievements, the latest and the biggest was the upgrade from developed to an emerging market by FTSE Russel. The company has also managed to launch number of services and products within very brief period and continued to maintain transparency to strengthen its leading position at the regional level.

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