* Kuwait to privatise stock exchange
Kuwait’s Capital Markets Authority signed an agreement on January 22nd to privatise the Kuwaiti Stock Exchange.
Economic analysts welcomed the agreement and said the move will help strengthen Kuwait’s economy.
The agreement was signed with HSBC Holdings, which will prepare studies on the privatisation of the stock market and create a new company to own and manage the exchange, according to the agreement. The bank will complete its work within six months.
Pursuant to the stock exchange privatisation law, the new company should have been established no later than the end of March 2012.
Abdullah al-Qabandi, head of the stock exchange privatisation committee, said the project is in line with Emir Sheikh Sabah al-Ahmad al-Sabah’s goal of transforming Kuwait into a regional financial and trade centre and with the development plan the government launched recently.
Al-Qabandi said in a press statement after the agreement was signed that Kuwait will become one of the first countries in the region to privatize 100% of its stock market.
The privatisation plan, if completed, would make Kuwait the second country in the region to have a private exchange after Dubai.
Kuwaiti citizens will own 50% of the new company and the balance will be offered to companies listed on the exchange, each of which will only be able to buy a 5% stake in the company.
The Kuwaiti parliament passed a law in 2010 establishing the Capital Markets Authority to serve as an independent regulator of the stock exchange in order to enhance transparency in the Arab world’s third-largest financial market.
Capitalisation of the Kuwait Stock Exchange is currently estimated at $100 billion, and 215 local and foreign companies are listed.
Move strengthens Kuwait economy
Dr. Yasser al-Kuleib, a professor of finance and investment at Kuwait University, told Al-Shorfa that privatisation of the stock exchange will be beneficial to the Kuwaiti economy.
“It is an established fact that privatisation is a fundamental component of economic growth because once an institution is converted from a public entity to a private entity it prospers and becomes profitable, which is what will happen with the Kuwaiti stock exchange,” he said.
“This does not necessarily mean that privatisation will affect stock trading or investor profits, but it will certainly contribute to development of the stock exchange’s operations and promote transparency.”
Al-Kuleib said HSBC will serve strictly in an advisory capacity within a specified period that will end when the contract expires in six months.
Majid al-Ali, an analyst and economist, welcomed the move but said it is a belated one.
“Kuwait needed to take this step a long time ago, especially since the idea was submitted by veteran economist Jassem Mohammed Abdul Rahman al-Bahr seven years ago, but it took all this time for it to be implemented,” he said.
Al-Ali said many developed countries privatised their stock exchanges, which helped liberalise their economies and currencies from restrictions that were imposed by the government.
“This is what we are hoping will happen with the Kuwaiti stock exchange, namely an economic recovery that enables Kuwait to fulfil its ambition of becoming a global trade centre,” he said.
Ali al-Mousa, Kuwait’s former minister of planning and a former central bank governor, said, “This is a natural progression that should have occurred some time ago, especially since the government enacted the privatisation law nearly three years ago.”
Al-Mousa said that the privatisation of the stock exchange is an administrative matter that will have no impact on the stability or continued volatility of the exchange which he said “are products of several political and economic factors at play in the country”.
“The privatisation of any government sector certainly helps propel development forward, which is what we hope will happen after the new company is created.”
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