Al Madina's sharp fall at home and away

Analysts struggle to find reasons behind the decline.

Al Madina for Finance and Investments is not a popular stock at the moment. The Kuwait investment company shed 2.1 per cent of its value to 0.046 Kuwaiti dinars yesterday on the Kuwait Stock Exchange, where it is primarily listed, and was among the major volume pushers of the day. Al Madina shares did not fare well on the Dubai Financial Market either, where they have a secondary listing, losing more than 3 per cent to close trade at 54 UAE fils.

Analysts are struggling to find the reasons behind the sharp falls. "There is nothing formally revealed on this company to justify the price action today," said Ali Khan, the head of equities at Arqaam Capital, an investment bank in Dubai. On the Kuwaiti bourse, Al Madina stocks have lost more than 14 per cent of their value since the beginning of the month, while they are down close to 90 per cent from their 52-week peak of Dh6.21 in September last year.

Faisal Hassan, the head of research at Kuwait's Global Investment House, is equally baffled. "If you look at the fundamentals, Al Madina is no better than any other investment company in Kuwait," he said. Al Madina has direct investments in the property, petrochemicals, education and financial services sectors. Kuwaiti lenders and investment companies were among the first in the region to show the signs of weakness when the financial crisis gripped the region towards the end of 2008. Most lenders were heavily exposed to these investment companies, which in turn had made investments in the property sector. With mounting losses on investments and deterioration of asset quality, a number of companies had opted to restructure their debts.

Al Madina is no exception and last month managed to reschedule 45 million dinars of its total 50m dinar debt owed to five local and international banks, according to local media reports. Some of the investment companies have now started showing signs of strength but Mr Hassan said that for actual recovery to take place, the market would have to wait for a couple more quarters. Investors do not seem to have the patience for that.