Kuwait Stock Exchange (KSE)

Kuwait Stock Exchange (KSE) has been listing and dealing in treasury bills and bonds since 1987 in addition to the shareholding companies. It has introduced mutual funds open to Kuwaitis and foreigners alike.

In August 2000 the Kuwaiti Cabinet approved regulations necessary to implement the bill allowing foreigners to own stocks and trade on the bourse. The legislation allows foreign investors and expatriates living in Kuwait to own up to 100 per cent of the stock of Kuwaiti companies listed on the KSE, except in banks where the ownership will be limited to 49 per cent. The new regula-tions provide complete freedom for foreigners to buy, sell and own stocks like Kuwaitis. KSE has plans to intro-duce trading through the Internet to enable foreign investors easy access to Kuwait stocks. Their website is www.kuwaitse.com. The article (3) of the law states that the rules applicable in the Kuwait Stock Exchange will be applied on the shares possessed by non-Kuwaitis in the share holding companies that are enlisted with Kuwait Stock Exchange.

Trading system

The early 'over-the-counter' system or the open system, which accomplished trading through negotiation between the buyer and the seller, with absolute freedom of price limits, led trading in the Kuwaiti stock market into a speculative investment climate. Speculation was the prime objective of dealers which led to fragmentation of the market, where prices differed from one broker to another.

In 1983 an Amiri Decree was issued which led to the reorganizing, new administration and application of new system where trading is consummated through registering the bid and offer prices on the designated board in the trading hall.

The Clearing and Transfer of Ownership System

An Amiri Decree was issued in December 1986 concerning organizing the trading activity and the clearing system in the Exchange. The decree handed over the duties of administration to the clearing chamber, to clear the transactions for registered shares in the market and to specify the parties and rights of each deal.

Accordingly, the KSE committee issued resolution No. 3 for year 1987 which placed responsibility of clearing and providing the latest record of names of parties holding shares to the registered companies. In May 1987, a Director General resolution was issued concerning the organization of settlement and transfer procedures for listed shares. The Kuwait Clearing Company (KCC) was assigned the responsibilities of the clearing chamber in the exchange. KCC is entitled to settle obligations arising from transactions registered there.

The clearing system was a success and the Director General issued another resolution in May 1988 regarding clearing process on the basis of net balances. According to the new system, the clearing company will deliver each broker a report the following day showing the balance of his clients, from cash and shares. The clearing company will make a general settlement for all parties every Saturday.

Kuwait Automated Trading System

KSE operates now on the most modern computerized system. The Kuwait Automated Trading System (KATS) is a computerized trading system based on software specially developed and customized for the Kuwait Stock Exchange.

One of its many features is the capability of linkage with traders outside the Exchange, covering all of Kuwait's governorates and possibility of linkage with markets outside Kuwait in the future.

This system, while being very efficient, offers security and fairness and equality between traders. It guarantees complete confidentiality for traders while completing transactions, thus increasing trader confidence and transaction volume.

All information necessary for trading is available readily. Authorized brokers have equal access to the Exchange via a KATS workstation, in their offices at the Exchange.

Brokers directly enter orders into computer linked to the central exchange computer. The system immediately checks the validity of the order and the information is updated as it occurs with every new order and trade. KATS users can watch the fluctuations of the market as they occur. Within a few seconds of an order placement, the broker knows whether his order was traded, cancelled, or placed into the order queue.

Brokers are assigned a user number by the Exchange which allows them to access a variety of information necessary for securities trading. Other great advantage of KATS is the ability it provides to broker to access various public, proprietary and reference tables which may be necessary for trading stocks in the regular market.

Some of the features of KATS are:

• Stock quotations table

• Individual stock indices

• Sectorial indices

• Daily quotations and index

• Monthly quotations and index

• Company background information

• Company financial data

In addition to easy placement of orders and access to information, KATS allows brokers to send and receive messages while trading, enabling the Exchange to keep brokers abreast of the latest information and permitting brokers to communicate with each other.

Trading cycle

The interested client has to approach a brokers office to fill out a form related to the opening of a customer account through the Kuwait Clearing Company. This is done to obtain the customer card which bears the clients name and account number used in the process of clearing transactions. After this the process for a client-broker to enter and complete a transaction using KATS is as follows:

Interested client issues instructions personally or phone. Broker logs on to KATS using his ID number accessing the information needed for the transaction. Broker opens stock order form and enters the investors account number and the stock ticker symbol and the direction of the order i.e. buy or sell and the price of the order indicating number of shares. When transaction is complete the client is issued an account statement.

KATS automatically compiles data related to all transactions and compiles it into the daily bulletin. All tasks related to securities trading, quotations, cancellations, replacements and odd lot orders, are accomplished using the same simple format. KATS keeps track of all trading activity and information and provides a quick, accurate and efficient trading cycle.

KSE Index

The Kuwait Stock Exchange adopted formula for price index calculation based on the internationally accepted standard for index computation. It automatically adjusts for dividends and distribution reflecting accurate results. Daily newspapers publish market details.

KSE has total of 86 listed firms and in terms of capitalization Kuwait is second after Saudi market in the Arab Gulf countries.

KSE Trading & Price Movement in the year 2001

During the year 2001, the KSE witnessed several developments in trading activity, prices, performance of listed companies and market capita-lization. The total value of traded shares during the year 2001 reached KD 3581.1 million (for 16299 million shares) against KD 1290.4 million (for 6758 million shares)for the previous year, i.e. an increase of KD 2290.7 million, or 177.5% and prices of listed company shares incresed by 26.8%. Also, the total market value of traded shares in the KSE rose by KD 1933 million (30.3%) compared to the previous year. The daily average traded value reached KD 9.4 million (181%) compared with the previous year.

It is worth noting that year 2001 witnessed the resumption of implemen-tation of the program for the sale to the private sector of shares owned by the government in certain listed companies, whereby 113 million shares owned by the government in the Mobile Telecommunications Company were sold at KD 1.453 per share through public subscription during the period from 2 to 16 April 2001; the total transacted value reached KD 164 million.

Companies listed on the KSE recorded a rise of 23% in profits during year 2001, compared to the previous year. The total profits realized by 81 companies out of 88 listed on the KSE at the end of year 2001 reached KD 578 million from KD 470 million for the same companies in the year 2000, a rise of KD 109 million.

The number of companies listed on the KSE at the end of 2001 reached 88, of which 78 are Kuwaiti companies and 10 non-Kuwaiti companies. Two new companies were listed during 2001, one in the investment sector and other in the non-Kuwaiti companies sector.

The total nominal value of the listed companies capital at the end of year 2001 reached KD 2.6 billion, of which 49% or KD 1.3 billion were accounted for by the financial companies (companies listed under banking, investment and insurance sectors). Real estate companies followed with 16% of the total or KD 0.42 billion. The total nominal value of listed companies capital rose during the year 2001 by KD 49 million (1.9%).

KSE performance from January to September 2002

The Kuwait Stock Exchange (KSE) was more active during the first half of 2002 compared to the same period of 2001; leading to an increase in all its major indices. The total traded value, up to 30/6/2002 was KD 3,580.1 million, with a daily average of KD 30.1 million; an increase of 134.1 per cent and 400.7 per cent over 2001 daily average and 2000 daily average respectively. April 2002 was the most active month in terms of trade volume and the number of shares exchanged. June 2002 was most active in terms of value traded since it reached KD 944 million.

Value of traded shares during the third quarter of 2002 (July-September) recorded KD 1,342.4 million, about 46.9% of the value of shares traded during the second quarter of 2002 that reached around KD 2,527 million. Average daily traded value registered KD 21 million which was lower than that of the second quarter (39.5 million) but higher than the first quarter (KD 19.1 million).

During the first nine months of 2002 value of traded shares reached KD 4,922.5 million reflecting a sharp rise of over 66.2 per cent of the traded value during the same period of 2001(KD 2,962 million).

According to Al-Shall report, information collected on 82 companies for the first quarter of 2002 show collective profits to reach KD 166.5 million, compared to KD 203.4 million for the same companies for the first quarter of 2001, a decrease of 18.1%.