Kuwait will allow foreign investors to own and trade shares in the Arabian Gulf country’s banks ahead of index-compiler MSCI’s anticipated decision next year to upgrade Kuwait to emerging-market status.
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The decree allows foreign investors to own up to five per cent of a Kuwaiti bank’s capital directly or indirectly,
state-owned Kuna news agency reported on Saturday citing the Ministry of Commerce and Industry. Any levels exceeding that limit will require the Central Bank of Kuwait’s approval.
“The latest move comes in accordance with Decree 694/2018, which notes that the non-Kuwaiti investor shall be allowed to own and trade in Kuwaiti banks’ shares,” Kuna reported.
Kuwaiti banks are expected to post higher annual earnings in 2019 driven by more lending as the government presses ahead with project spending and consumer confidence improves, according to Egyptian investment bank EFG-Hermes. Average earnings at Kuwaiti banks are forecast to rise 15 per cent driven by a 6.4 per cent year-on-year increase in loans in 2019, it said in a report last week. Kuwait’s banking sector delivered the strongest earnings growth among its Gulf peers, posting a 19 per cent increase in the first nine months of the year.
The foreign ownership decree comes as the country overhauls its capital markets to attract more foreign inflows. Boursa Kuwait, which is preparing for its own initial public offering in the first quarter of next year, introduced several measures to revamp the capital markets since it took control of the Kuwait Stock Exchange in early 2016. It relaxed listing rules, delisted companies deemed unsuitable for public investment and segmented the market with different disclosure requirements.
The decree comes follows the decision to add Kuwait to the S&P Dow Jones Indices’ Global Benchmark Indices with an emerging market classification by next year. US index provider MSCI will decide in June whether to upgrade Kuwait to the widely tracked emerging-market benchmark.
The inclusion would result in $2 billion (Dh7.3bn) of passive inflows, according to analysts at Arqaam Capital and Franklin Templeton.
Kuwait’s inclusion in the FTSE Russell Emerging Markets Index in September is expected to attract $1bn of passive inflows to its capital markets, according to Franklin Templeton. Passive investors track indexes and do not pick stocks.
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