Boursa Kuwait launches new index to encourage trading in main market shares

BK Main 50 index comprises the 50 most-actively traded shares in subsection of the market

A Kuwaiti trader follows stock prices at the Boursa Kuwait stock market in January.  Kuwait's stock market will be upgraded from frontier to emerging market status in May by index provider MSCI. AFP

Boursa Kuwait created a new BK Main 50 index containing the most heavily-traded shares in its main market.

The operator of Kuwait's equity market, which listed its shares in a public offering last December, said the new index will represent the 50 most liquid shares, weighed by market capitalisation.

“The launch of the BK Main 50 Index represents a significant step further in Boursa Kuwait’s market segmentation and forms part of our ongoing endeavours aimed at creating a robust capital markets ecosystem in Kuwait," said Boursa Kuwait's acting head of markets, Noura Al Abdulkareem.

"This development, helping enhance the appeal of the equity market to foreign investors and encourage higher participation of local retail investors, will further strengthen the company’s position as a leading stock exchange in the region,” she added.

In 2018, Boursa Kuwait segmented the local market into three separate sections as part of a series of ongoing reforms to its capital markets.

The Premier Market Index contained the 16 biggest companies by market capitalisation, including National Bank of Kuwait, Kuwait Finance House and logistics company Agility.

The threshold for inclusion was a free float of shares worth at least 45 million Kuwaiti dinars (Dh542m) in a company that had been operating for a minimum of seven years.

The main market included companies whose free floating shares had a value of 15m dinars and three years of operations. Companies that failed to meet either of these criteria joined the auction market containing the least liquid shares. Trading takes place in the auction market twice a day, each lasting 15 minutes.

Boursa Kuwait said the launch of the new index comes ahead of the reclassification of the country's stock market to emerging market status from frontier by MSCI, which was confirmed by the index compiler in December. The inclusion will take place this May. Similar upgrades were announced by index providers FTSE Russell and S&P Dow Jones in 2017 and 2018, respectively.

The inclusion of Kuwait into MSCI's emerging markets index is likely to lead to as much as $3 billion (Dh11bn) in passive inflows, Boursa Kuwait said at the time of the announcement.

The likelihood of an upgrade nudged up interest in Kuwait's Premier Market index last year, which outperformed all other markets, closing up 32.4 per cent, according to Kamco Research. However, the main market index only increased 3.6 per cent.

"The positive expectation for Kuwaiti equities was reflected in record net foreign inflows recorded in 2019, at about 600m dinars," National Bank of Kuwait's economic research department said in a quarterly economic briefing last week.

It said the market is likely to witness "additional sizeable passive and active capital inflows" this year, but that some profit-taking is likely given the strong uplift in value experienced by some of its biggest companies last year.