Kuwait Stock Regulator Plans Changes To Align Market With Global Norms

Kuwait’s Capital Markets Authority will separate the settlement of trades from its central depository and make the time allowed for the transfer of securities the same for all investors, to bring its practices in line with international norms, its vice chairman told Reuters.

The exchange, one of the oldest in the Gulf Arab region, has struggled in recent years because of a sluggish economy and a stagnant regulatory environment. Consequently, it has lost ground in the eyes of foreign investors to markets in the United Arab Emirates, Qatar, and Saudi Arabia.

Kuwait’s regulator was now looking to improve the investment environment in the country and raise its classification among index companies such as MSCI to emerging market from frontier market — a move which the UAE and Qatar made last year.

This includes plans to take settlement of stock sales away from the Kuwait Clearing Company, Mishaal al-Usaimi told Reuters in an interview in Cairo.

“We are working on launching a bank for cash settlement, because it is currently part of the role of clearing, and according to international best practice, they need to be separated,” Usaimi said.There is cooperation with the central bank to regulate the settlement system, Usaimi said. The central bank will supervise the new entity, he said.

The CMA opened in 2011, making it a relatively new entity. It has had problems recruiting and retaining senior staff and drawn criticism from market participants for being too heavy-handed in its approach.

The market regulator also plans to set a single period for transferring ownership of a security at two or three days after the sale, he said. Kuwaiti citizens now have their trades settled at the time of the transaction and foreign investors two days after the transaction.

“These changes will help raise the classification of the Kuwait stock market from frontier market to emerging market,” Usaimi said, without specifying when the reforms would be introduced.

Kuwait’s market has struggled to recover from the global financial crisis and still sits 59 per cent below its 2008 peak. Markets in the UAE, Qatar and Saudi Arabia, by contrast, have recovered much of their lost ground.