Kuwait stock exchange (also called as Boursa Kuwait) is the oldest in the region that is currently going through several modernization efforts. Kuwait's strong economy backed by sizeable reserves provides the context for a capital market that is now eager to globalize. The fall in oil prices has highlighted the need for developing the non-oil sector and having a robust capital market. This triggered a series of reforms from the Capital Markets Authority in the form of a Market Development Project, aimed to remove the existing impediments in the equity market. Recently the Kuwait stock exchange has been included in several emerging market indices paving way for active foreign investment.
The key positive trigger for the markets in the past few years has been the inclusion of Kuwait into emerging market indices, which bring passive and active inflows while also improving the market visibility among investors. However, Kuwait market were not able to benefit completely from the positivity surrounding the emerging market upgrade due to the COVID-19 pandemic. A sharp decline in oil prices and lockdown restrictions due to the pandemic were a major negative for the corporate earnings of domestic companies.
The listed company space in Kuwait is primarily dominated by banks proving the need for a more diversified market base. The privatization and listing of Boursa Kuwait is also seen as a positive step in the region where most of the stock exchanges continue to be fully owned and controlled by government. Also, the capital market requires introduction of several new products including derivatives for a more vibrant role of capital market in the capital channelling process. Broad basing the market through more listings and products could also enable attracting the much-needed institutional investment (both domestic and foreign). This will move away the domination of retail investors that currently feeds into speculation.
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