Exclusive: Boursa Kuwait CEO on its privatisation agenda

Amid maturing regional equity markets and realigned international investor interest – that have helped shift the world’s economic centre of gravity – Kuwait’s stock exchange, Boursa Kuwait, is keen to develop an efficient capital market to attract attention and carve its own space.

Of the many initiatives in recent years, Boursa Kuwait’s privatisation agenda, that culminated in its listing in October this year, was a key event to fortify the exchange’s position. Capital Markets Authority, Kuwait’s market regulator, put up 50 per cent of its shares in Boursa Kuwait for sale, subscription of which was exclusive to Kuwaiti nationals.

“We plan to raise KWD10m ($33m) – it is the par value set at 100 fils per share,” said Mohammad Saud Al-Osaimi, CEO, Boursa Kuwait.

Trading of Boursa’s shares will be open for all nationalities, post its anticipated listing by June next year. The IPO was preceded by a sale of 44 per cent of Boursa’s stake to a consortium of investors – Athens Stock Exchange, National Investments Company, First Investment Company, and Arzan Financial Group – in February this year. The Kuwaiti government, through the Public Institution for Social Security, holds a 6 per cent stake in the exchange.

“We are extremely proud to be the first entity that gets privatised in Kuwait. Secondly, we are almost 100 per cent privately owned. We anticipate welcoming our shareholders beginning next year with a good equity story in the upcoming two to three years,” added Al-Osaimi.

In 2018, Boursa Kuwait announced its plans for market segmentation, a common practice among international exchanges. Its premier market segment, that lists prominent entities such as Agility, National Bank of Kuwait, and Kuwait Finance House, has a listing criterion of at least KWD45m ($148m) in fair value of shares not owned by either a person or group controlling the company. The main market segment lowers the threshold amount to KWD15m ($49m).

One of Boursa Kuwait’s reforms stipulated all listed companies in the premier market segment to host a mandatory quarterly analyst conference within five days of the disclosure of their financials.

“We have changed the listing criteria in 2018, where we focused on free float that is being raised rather than a percentage – prior to that, it used to be a cut-off of 30 per cent,” said Al-Osaimi.

Boursa Kuwait’s evolution has been internationally recognised: In December 2018, S&P Dow Jones Indices announced Kuwait’s inclusion in its global benchmark indexes with an emerging market classification in September 2019. Earlier this year, index provider MSCI also announced Kuwait’s upgrade to emerging market status, contingent on the creation of omnibus account structures and same National Investor Number (NIN) cross-trades for international investors by end of November.

“We are very proud that we were able to conclude the work prior to the deadline. The rules have been published, ” said Al-Osaimi, confirming the implementation of the two trading reforms.

The MSCI reclassification could reportedly attract an estimated $2.8bn inflows from passive funds to equity markets. Currently, China (33 per cent) leads MSCI’s emerging market index, followed by Korea (13.02 per cent) and Taiwan (11.35 per cent).

Promising outlook

Boursa Kuwait is set to close the year on a high note. According to PwC’s Q3 GCC Capital Markets Watch report, the exchange outperformed its GCC peers in terms of cumulative total returns during the first nine months of 2019.

Looking at listing activity, Kuwait also launched the IPO of the state-owned Az-Zour North Independent Water and Power Project this year. The exchange’s market capitalisation in October reportedly rose to KWD33.08bn ($109bn), scaling from KWD32.86bn ($108bn) in September.

Unsurprisingly, the New Year seems positive too, in terms of anticipated listing activity.

“Other than Boursa Kuwait and Az-Zour, we anticipate an additional one to two (IPOs) in 2020. Most of the IPOs in the upcoming 12 to 18 months will be of non-banks. I don’t anticipate any financial institutions to be a part of this. However, I anticipate something probably from services, real estate, industries or family businesses,” noted Al-Osaimi.

On a regional level, Saudi Aramco’s IPO will not only drive local momentum but is also expected to draw greater attention to the region that could act as a catalyst for increased activity amid regional equity markets.

“I am really glad that the Saudi government has decided to IPO Aramco in Saudi rather than on other international exchanges, as it will get more attraction for the region as a whole.

“Saudi Aramco is very well known, and investors will have more appetite to look into it. Any analyst who didn’t cover the region will definitely cover Aramco, and that will give exposure to the whole region. In Kuwait, our own pilot testing entails the privatisation of the government-owned Az-Zour power plant. We hope that it will be successful and hopefully others will follow the footsteps of the Saudi government.”