The Kuwait Capital Market will continue to lose importance in local and GCC terms. Its share of the total GCC Market capitalization and its share of daily trades (by value) of the total GCC trading, will continue to shrink to where it will eventually be the smallest or second smallest market. This is a dramatic slide that has seen it drop from the second largest GCC Market and The Regional Capital Market, to nothing that anybody outside Kuwait needs to think about.
This loss of market share has been driven by the following key factors:
Loss of non-Kuwaiti companies that have decided to delist in Kuwait and list in DIFC or other more competitive markets.
Kuwaiti companies double listings at Dubai (DIFC) seeking to increase their exposure to regional investors and liquidity. (This has move a percentage of the daily turnover to Dubai).
The Kuwait Economy dropping from 2nd largest GCC Economy to 3rd largest after UAE.
The increasing dominance of the state in the Kuwaiti economy, hence squeezing out the private sector and producing fewer private ventures to list.
The new entry of CMA (Capital Market Authority) and the early learning experience of a heavy handed bureaucracy , where no one will risk a mistake and an environment where NOT WINNING IS NOT IMPORTANT, NOT MAKING A MISTAKE IS VERY IMPORTANT.
As small and medium size companies exit this market and larger companies seek second listings for better liquidity and cheaper capital, local investors will find it necessary to use other regional markets to find the needed diversity and liquidity as a result the Kuwait capital market will become irrelevant to local , regional and global investors.
The only way Kuwait can have a chance to reverse some of its Capital Market loss is by creating internal competition in the capital market arena with at least:
Three competing stock markets (UAE has three).
A minimum of three competing clearing companies.
New licenses for regional and Global bookers.
Encourage stock markets to enter into regional or global alliances.
License regional and global investment banks.
Add global expertise to the Capital Market Board.
The above strategies will work better if coupled with a national strategy to move economic activity from state ownership to private sector in a competitive environment and where the state bureaucracy has sufficient internal competition (see my separate notes on this subject).
A good well managed Capital Market as an industry can decouple itself from its local economy by attracting regional and global businesses if it can operate effectively and efficiently.