81.3% Correlation! December 26, 2008
Posted by Aziz in analysis, kuwait.Tags: KSE, Oil
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The chart above plots two interesting highly correlated assets if I may say, the Kuwaiti Stock Exchange (White line) and the price of the NYMEX Crude Oil (Orange line). the reason I chose the period between 2006 and 2008 is to show how they behave in a bull, bear market and at reversal points.
KSE Rally! – 9:05am December 23, 2008
Posted by mylastresort in analysis, kuwait.Tags: Intervention, KIA, KSE
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First 5 minutes of market open
The Kuwait Stock Exchange opened above 1.5% and rose over 200 points within the first 5 minutes. Nearly all shares have reached their daily limit highs. These actions follow the previous day announcement by KUNA regarding the KIA investment’s to take place on Wednesday.
“The market is reacting to the Minister of Finance’s statement regarding the portfolio injection… Investors are capitalising on this opportunity because all blue chips were limit down on Monday. I think the trend will reverse. All of the key stocks were limit up from the moment they opened, with huge bids.”- Ammar Hajeyah, Assistant Manager, Asset Management, Global Investment House
Kuwait SE: The Panic Continues September 16, 2008
Posted by mylastresort in analysis.Tags: bahrain, Bankruptcy, Doha, Dubai Financial Markets, Great Depression, KIA, KSE, Kuwait Investment Authority, Kuwait Stock Exchange, Lehman Brothers, qatar, Stock Market
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The Kuwaiti Stock Exchange (KSE) continued to suffer from panic selling reaching a limit low for the day. Nearly all the companies on the exchange reached their daily limits dropping the maximum (approx. 5%) in the session. News that the Kuwait Investment Authority (KIA) will be investing $1 billion is eagerly awaited by the market participants having suffered large losses in a short period. Losses were felt all across the globe on Monday, the day is being referred to as “Black Monday” once again following Lehman Brothers collapse.
The global markets have suffered the most massive losses ever before witnessed in the past century. The US economy is being compared to the Great Depression of the 1920’s while the European union has not seen such catastrophe in its short history to compare it to. While in the Gulf the markets continued their decline since the beginning of the month.
Here is a summary of closing indexes:
- Kuwait Stock Exchange -3.80%
- Abu Dhabi Index -4.35%
- Dubai Financial Markets -1.71% (had reached -9.5% in the day)
- Doha Stock Market -7.06%
- UK FTSE 100 -3.92%
- Dow Jones Industrial Average (DJIA) -4.42%
- S & P 500 -4.71%
Part 3: The Collapse of the KSE September 9, 2008
Posted by mylastresort in analysis, qatar, saudi arabia.Tags: bahrain, Central Bank, Central Bank of Kuwait, Collapse, economy, Government, inflation, KSE, Kuwait Stock Exchange, qatar, Regulations, uae
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Kuwait’s Neighboring Nations
In Bahrain and the United Arab Emirates (UAE) riots began to proliferate among residents demanding action due to the rising prices in consumer goods. Doha and Dubai pride themselves as being tax havens while avoiding to mention double-digit inflationary figures. During the summer of 2008 all of the Gulf countries had peaked to record inflation levels never before experienced in the region.
The Lender of Last Resort
One of several methods to drain liquidity from the markets would be to increase interest rates to levels that would tempt investors to leave the exchange and head to the banks. The Central Bank of Kuwait (CBK) had failed to affect the markets in its previous attempts at raising rates therefore decided to force banks to increase rates without hiking the discount rate, by altering the money supply.
During July 2008 banks experienced a severe loss of liquidity in the market that forced banks to rapidly increase rates in an attempt to remain solvent and avoid the penalties set by the lender of last resort. Short-term deposit rates increased dramatically as banks battled for funds in order to remain solvent. Market participants finally recognized that banks were offering attractive rates that were enough to make them shift to deposits. During the period, banks were behind hundreds of thousands of dinars per day in penalties and exaggerated deposit rates forcing the central bank to flood the market with funds to avoid creating a new crisis.
Part 2: The Collapse of the KSE September 8, 2008
Posted by mylastresort in analysis, bahrain, qatar.Tags: bahrain, Central Bank, Central Bank of Kuwait, Collapse, economy, Government, inflation, KSE, Kuwait Stock Exchange, qatar, Regulations, uae
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The CBK Regulations
The Kuwait Stock Exchange (KSE) had exhausted all locally available funds by 2005. Beginning in 2006 the market was increasing based on the concept that investors who entered into new positions were not selling shares in the market to buy new ones rather they were trading on leverage, obtaining bank loans, or selling foreign assets to acquire additional exposure in the surging market. The regulators acknowledged the pending epidemic and set up sequential regulations at drying up liquidity in the market to contain inflation.
The Single Gulf Currency
Beginning in 2004 serious discussions between the six GCC nations began regarding the unification of the Gulf’s currency. Central bank Governors would hold regular meetings to discuss methods and deadlines for the process. The Governors decided that no major changes to currency policy would occur and that inflation must be contained to strict measures prior to the 2010 deadline. Following a regular meeting in May 2007 the Central Bank of Kuwait unexpectedly announced that it has entered into a currency basket, citing that the falling US dollar would boost inflation if the country remained in a pegged exchange rate system. The move astonished other members of the GCC since the move was in direct violation of the terms the countries agreed upon hours earlier. The currency revaluation was one of the the earliest moves the CBK had undertaken to combat the predicted inflationary threats of today.
The Regulations
In the short period following the Kuwait Stock Exchange (KSE) reaching the 10,000 points level the Central Bank of Kuwait (CBK) would unleash several coordinated regulations each serving the same purpose: Contain inflation. The CBK would allow listed companies to call for capital increases. Many companies increased capital, sending frantic investors to local banks to obtain loans. Then the first of the major regulations occurred, the CBK abruptly prohibits real estate investment and its use as collateral for borrowing purposes. The move prevented many from increasing debt to finance new investment opportunities. The move also sends the real estate market to decline by up to 40% in some areas forcing investors increase collateral or repay loans.
The CBK continued to allow companies to raise capital sending investors to the banks once more, this time to get consumer loans (without collateral) and placing the funds in the exchange. The central bank was adamant at ending leveraged positions in the markets, hence it announced a cap on consumer loans forcing market participants to only use available cash to invest in the exchange. No longer could individuals obtain massive loans to invest in the booming markets. The central bank predicted that the inflation rate would finally decrease. Soon after, the CBK surprisingly announced the highest inflation on record.
KSE panic selling, down 3% September 7, 2008
Posted by mylastresort in analysis.Tags: Collapse, Crash, Decline, KSE, Kuwait Stock Exchange, panic
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The Kuwait Stock Exchange (KSE) crashed on Sunday following a week long decline beginning on August 31, 2008. The market experienced a drop of roughly 500 points or 3.55%. The market index fell as low as 13442.80 in the day. There appears to be confusion surrounding the decline since there have been no significant events to cause such a panic.
- Abu Dhabi Exchange Index -3.74%
- Dubai Financial Markets -4.64%
- Doha Stock Market -2.89%
- Bahrain Exchange -1.01%
- Kuwait Stock Exchange -3.01%
For my subjective reasoning click on the following link: Part 1: The Collapse of the KSE
Part 1: The Collapse of the KSE September 7, 2008
Posted by mylastresort in analysis, bahrain, qatar, saudi arabia.Tags: bahrain, Central Bank of Kuwait, Central banks role, Collapse, economy, Government, inflation, KSE, kuwait, Kuwait Stock Exchange, Part 1, Part 2, Part3, qatar, Regulations, uae
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The recent collapse in the Kuwait Stock Exchange (KSE) index this past week has not been given its proper placement in the headlines. I have found it difficult to find resources covering the details of the collapse or reasons justifying the decline. Some might hail the events as a market correction but I believe the reasons are far more complex and intertwined with recent economical events in the country.
This post will be composed of 3 parts.
A Brief History of the Local Economy
Economies across the globe experienced massive economic prosperity beginning after the millennium ending in 2007. Emerging markets were recognized as superior untapped resources by some of the leading financial institutions. Several companies relocated to the third world in a race to attract as much wealth as possible. Investors in New York, London, and Paris devised plans to invest in countries they could not locate on maps. During the same time Kuwait experienced its own expansion of economic growth.
The rush of riches to the citizens from a single source in a rapid pace began worrying regulators. The Kuwait Stock Exchange (KSE) index multiplied exponentially in 10 years from 98 to 08. During this short period, college graduates headed directly to the exchange for employment regardless of specialization. Housewives began exchanging stock tips. Industrial and service companies began trading the markets neglecting their core businesses. Investment companies began propping up across the horizon. They all shared the same objective: To generate as much wealth in the shortest time possible. In order to maintain economic stability in the nation the central bank of Kuwait would need to act by containing growth to prevent surging inflation.
CBK Vs the Government
The Central Bank of Kuwait (CBK) has recently been finding it difficult to contain inflation using conventional methods. Central banks around the globe use their power to predict the future behavior of markets and adjust interest rates, money supply and use influence to guide markets in controlled movements. The central banks are capable of requesting aid from the governments to fight sudden implications, but of course the central bank is not required to act when the government requests certain actions from it. Also, the central banks must be independent from local politics and unbiased in their decision-making. These are core fundamentals that allow the central banks to operate in the most proficient manner possible.
In Kuwait however, the methods are different. During a year of record inflation parliament announces the highest spending budget in history, an increase in wages, demands decreasing the dicount rate, and finally the dissolution of consumer loans. The government’s actions were all created with the CBK’s direct objection proving that the government will not aid the CBK in preserving the economical well being of the country. The governments actions would prove catastrophic to the economy if left unabated therefore the CBK must act swiftly and alone to correct the government’s blunders.
Kuwait stock exchange rises to life-time high May 4, 2008
Posted by mylastresort in analysis.Tags: High, KSE, kuwait, Kuwait Stock Exchange, Noor Investment, Record, Stock Market
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The Kuwaiti Stock Exchange rises to a life-time high, lifted by investor hopes that elections this month are viewed as a positive sentiment in the market. The Kuwait Stock Exchange’s benchmark index increased .62% on Sunday and is at 14,847 points (after hitting a record high of 14,859.20 points). The market is expected to increase and hit new highs throughout the coming days to the election on May 17.
“Investors are waiting to see what will happen in the election. If it’s positive, then the market will remain in good shape”
Investment Dar wins buyback approval April 21, 2008
Posted by mylastresort in analysis.Tags: AlDar, investment, Islamic, KSE, kuwait, Kuwaiti, KWSE, Stock Exchnage
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The Investment Dar, a Kuwaiti Islamic investment firm, stated that it had won central bank approval to buy back up to 10% of its shares. The six-month buyback period begins on April 23 (Wednesday), Investment Dar said in a statement on the kuwaitse.com
MENA holding trade halted April 20, 2008
Posted by mylastresort in analysis.Tags: KSE, kuwait, Kuwait Stock Exchange, KWSE, Mena Holding
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For the past month MENA holding has increased exponentially. The stock which was trading at around 200 fils in the Kuwait Stock Exchange has grown to KD 1.280 (more than 500% return) in a month. This morning I was surprised to see that the stock was halted. No one knew why the shares were trading at limit highs every day but it was evident that it wasnt purely speculators.
** Update rumors that trading was halted pending an investigation into the reasons behind the sharp rise and limit high bids.
