Experts ‘alarmed’ at firms’ pullout from Kuwait bourse – Trend seen to persist till year-end unless solutions are found: analysts

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KUWAIT CITY, Aug 28, (KUNA): Recurring withdrawal of companies from Kuwait Stock Exchange (KSE) has become an alarming issue that requires remedies, particularly after six companies overall capital of which amounts to KD 125 million have declared taking such a move, according to analysts.

The 2008 global economic crisis and its ramifications have impacted negatively on these withdrawing companies, they say, forecasting the trend will persist till the yearend, unless prime solutions and stimulants are found to discourage stumbling ones from getting out of the market too.

Maitham Al-Shakhs, the Chief Executive Officer of Al-Arabi Brokerage Company, affirmed that the companies’ pullout from the KSE is alarming, noting that the enlisted once, in 2008, reached 224, as compared to 198 currently.

Most of the companies that declared pullout possess small chips, however the step remains largely substantial, partially due to other main factors such as the Capital Market Authority’s declaration about starting to enforce governance rules, viewed as additional burdens by these firms.

These companies have apparently failed in increasing their capitals through subscription and coping with the additional liabilities, warranted for enlisting.

Hamad Al-Hajri, also a financial expert, mentioned some factors that prompted companies to get out, such as this year’s KSE general atmosphere with regard of technical factors and incentives, absence of market makers, liquidity shortage which has been ranging between KD seven to ten million. He opined that in case this situation persisted in 2017, other companies would take an identical move.

Al-Hajri expressed particular concern at intention of major companies such as Kuwait United Poultry Company (KUPC) to pull out of the bourse. Such a step is quite alarming for other companies of major operating status and a large base of stakeholders may follow suit, he said.

Another company that has expressed such a plan is Kuwait Company for Medical Services, capital of which fetches KD 7.6 million. The company, enlisted in 2009, requested optional withdrawal from the parallel stock market by September 14th.

Capital value of Kuwait Stock Exchange (KSE) reached over the weekend KD 23.38 billion, compared to KD 23.57 billion the week before, dropping by 0.78 percent, Bayan Investment Company said in its weekly report covering the KSE.

The KSE key indices continued incurring losses for the second week in a row, settling in the red zone, amid selling pressure, profit generation and rapid speculation on a large number of chips.

Selling noticeably targeted the small and stagnant shares, market value of which is less than the nominal value — thus impacting on the benchmark which moved to the lowest level this month.

Bayan Investment Co indicated that the market was also affected with other factors, such as declining oil prices, which also left negative effects on other GCC bourses.

The Kuwait bourse lacked stimulants, discouraging traders from investing causing liquidity to shift to other markers in the Gulf, lured by lucrative and feasible trade opportunities The past week sessions were also marked with a wave of sales involving chips of various caliber, including those under umbrella of the Kuwait-15 index, which reflects trades in blue-chips. In fact, this index incurred the heaviest losses, as compared with those recorded under the other key indexes.

In the middle of the week, the indexes, temporarily, moved to the green zone due to some selective operations involving blue-chips in particular.

The KSE capital value before flare-up of the global economic crisis in 2008 had soared to more than KD 60 billion, approximately double the current value.

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