Charts & Numbers

During December the market confessed three important facts. The first is that the Kuwait Investment Authority (KIA) will not provide the optimism needed to restore confidence in the market. The second is that investment banks will fail in succession amid the greatest government intervention since souk almanakh. Finally that oil prices will no longer be controlled by the oil cartel, OPEC.

The Mega Fund Investment Strategy

Over the previous month Mustafa Al-Shamaly, Minister of Finance, gave three different statements, over a period of three weeks regarding the date of the first acquisition of the Mega Fund. Following the third statement investor confidence turned to a new low as speculators lost faith in the market or the very existence of the Fund.

 For almost thirty days almost low volatility would continue in the market. On December 18^th volatility and sharp declines returned to the market. A week later, on December 22^nd, the KSE marked a new low of 8,211 points. Investors believed the Mega Fund was just a bluff. However, on the same day the Minister of Finance announced that the Fund would start buying securities on December 24^th.

The market began to rally following the statement. On December 23^rd the market increased substantially in anticipation of the Mega Fund acquiring shares the next day. December 24^th came and the market lost its hype and began to tumble. On December 25^th reality struck. The Mega Fund eagerly anticipated was accumulating stocks, but not raising prices, the buying would occur at limit lows. The KSE tapped a new low and closed at 8,240 points (down 2%).  On December 28^th, finally KSE Index broke the 8,000 level during the trading session.

The KIA strategy for the Mega Fund is purely investment for profit, not to stabilize the market as was implied. Previously investors believed that the Mega Fund would build a floor to stabilize the market.

The KIA is entering the market in a smooth way, accumulating desired positions at the best possible prices. This strategy put investors face to face with reality, that the KIA will not push the prices up rather it will take long positions at the best possible prices.