KUWAIT CITY, 9 March 2005 — Kuwaiti shares rallied past the 7,000-point psychological barrier for the first time yesterday on the back of optimistic economic indicators and speculative trades, analysts said.
The Kuwait Stock Exchange (KSE) index finished trading at 7,103.80 points, a new all-time high, up 1.5 percent on Monday’s close of 6,995.10 points. The index has gained 4.7 percent over last Wednesday’s close of 6,781.80 points and is 10.8 percent above the 2004 close of 6,409.50 points. KSE trades five days a week from Saturday through Wednesday.
The market has been rising for the past three weeks after the US Defense Department awarded a multi-billion-dollar contract to a private Kuwaiti firm, but the rise in the first four days of this week has been spectacular. All market indicators set new records for the year with the value of trading on Monday hitting 179.1 million dinars ($607 million), an all-time high.
Trading revolved around Public Warehousing Co. (PWC), which won a $3.27 billion Pentagon contract, its sister companies and a number of blue chips. But Jassem Al-Saadun, head of Al-Shall Economic Consultants, the emirate’s leading independent economic think-tank, warned that the increase was not justified by economic fundamentals.
“The market is certainly hot. The increase of PWC and its sister companies is understandable, but to also pull the whole market to skyrocketing levels for three weeks is not justified” by economic reasons, Saadun told AFP. “It appears there has been plenty of speculative trading which effectively contributed to the surge of the market,” he said.
Strong oil prices and high output have brought huge dividends for Kuwait which depends on oil income for more than 90 percent of its revenue. According to latest figures issued by the Finance Ministry, actual revenues posted in the first 10 months of the 2004 2005 fiscal year which ends in March topped $24.5 billion, more than double the budget estimates for the whole year.
Independent economic reports have forecast a budget surplus of around $10 billion at the end of the year, more than twice the windfall boasted last fiscal year.
This has accelerated capital spending in the emirate and the government opened and launched a number of multi-billion-dollar projects in the past few months with many more in the pipeline. “Strong oil prices, increase in public spending by about 10 percent and the launch of mega projects are certainly significant reasons for the KSE rise. But they do not justify the highly-exaggerated surge,” Saadun said. “We must be cautious in our optimism. If this trend continues, I believe we are heading for a major crisis,” he said.
The Kuwaiti bourse is the second largest Arab stock market after Saudi Arabia with a capitalization of more than $80 billion. The exchange has 129 listed companies and yesterday Lebanon’s bourse leader Solidere, founded by former Premier Rafik Hariri who was assassinated on Feb. 14, became the latest addition. The market has been steadily rising for the last four years but its pace picked up remarkably after the overthrow of former Iraqi leader Saddam Hussein in April 2003. The index ended 2004 up 33.8 percent.
