Kuwait Times

Published Date: November 19, 2008

KUWAIT: Kuwait has asked its investment arm to set up a fund to invest in the bourse to shore up confidence, after investors managed to briefly halt trading following weeks of decline. "The cabinet decided to assign the Kuwait Investment Authority to set up a long-term investment portfolio, in cooperation with other government institutions, to invest in the Kuwait Stock Exchange," the cabinet said in a statement yesterday.

The move aims to support the economy and contain the impact of the global financial crisis and to boost confidence in the local market, the second largest Arab bourse, the cabinet added. It did not say the size of the fund, but some local newspapers said yesterday, in unsourced reports, it would be in billions of dinars. A central bank-led task team was assigned "to put in place the technical regulations" for the fund, the cabinet said.

On Monday, central bank governor Sheikh Salem Abdul-Aziz al-Sabah called on the government to ask KIA to swiftly set up the fund to shore up the bourse, which has fallen more than 30 percent this year. Last month, the sovereign wealth fund KIA, which manages Kuwait's oil-generated assets of at least 72 billion dinars ($265 billion), increased its investments in eight stock funds on the local bourse to support the market.

KIA is a major shareholder in many Kuwaiti companies including heavyweight Mobile Telecommunications Co. The bourse halted trading on Thursday due to a court order won by investors seeking emergency measures by the government to protect their holdings and prevent further declines on the sagging bourse. Trading resumed on Monday after the government won an appeal against the court ruling.

Meanwhile, Arab stock markets across the oil-rich Gulf were mixed yesterday amid volatile trading as they continue to reel from the global economic turmoil. The Saudi Tadawul All-Shares Index (TASI) was down four percent at below the 5,000-point mark following two days of slight gains. It had opened the week on Saturday 7.4 percent lower. The market was again pulled down by the leading petrochemicals and banking sectors, which dropped about 6.6 percent and 4.3 percent, respectively. Market leader SABIC div
ed 7.2 percent.

The TASI is now more than 54 percent down on the year. The Kuwait Stock Exchange Index fluctuated sharply throughout the day before closing in positive territory for the first time since November 5. The KSE Index finished up a meager 0.36 percent at 8,583.30 points, spurred by the leading banking sector which gained 4.2 percent. The market has failed to fully react to a package of good news from the government.

The governor of Kuwait's central bank, Sheikh Salem Abdulaziz Al-Sabah, who heads a government task force to deal with the financial crisis, said the team has recommended that the state establish a portfolio to buy shares. The portfolio, to be run by the Kuwait Investment Authority, the emirate's 300-billion dollar sovereign wealth fund, would buy shares of selected firms on the KSE on a long-term basis, Sheikh Salem said.

He gave no figures for the portfolio but local media said it could run into billions of dinars. The council of ministers was expected to approve the recommendation during its meeting yesterday. The market was also affected by news that Gulf Bank's heavy losses from derivatives deals amounted to KD 375 million dinars. The bank's board resigned before recommending doubling its capital.

In the United Arab Emirates, the Dubai Financial Market also fluctuated sharply amid highly volatile trading on the stocks of its market leader, the property giant Emaar which was swinging between a six-percent rise and a close of 10 percent down. The DFM Index rose more than three percent at the opening but closed down 5.1 percent at 2,033.14 points. The real estate sector as a whole dropped 9.5 percent. The index gained a healthy eight percent on Monday.

Sister bourse, the Abu Dhabi Securities Exchange, added 1.3 percent to close at 2,883.78 points on the back of a huge seven-percent gain by the leading real estate sector which has spurred the market for the third day running. The Doha Securities Market gained 2.8 percent but stayed below 6,000 points, while the small Muscat Securities Market added 1.4 percent. The Bahrain Stock Exchange lost just 0.1 percent. - Agencies