Kuwait bourse, GCC No1 for 2001

The Kuwait Stock Exchange was the best performing GCC capital market in 2001 and posted a 27 per cent gain for the year.

At a time when London and New York spent a second year in decline, this was an outstanding performance. Only the UAE came close, with a sprint in the last few weeks of the year taking the market to a 25 per cent rise in 2001.

Things looked even better in August for Kuwait, with the KSE up 37 per cent. But then came September 11th with all its wide-ranging implications. And the KSE slipped from a year high of 1,810.6 points back to 1,716.9 points by the end of December.

For 2002 brokers expect another good year, although many question whether such a stellar performance can be repeated. The outlook for oil revenues is not that good, and this could dampen the KSE. There is also the possibility that Western markets may pick up and that money will flow out of the KSE. Also the investment of Iraqi compensation funds will probably dry up in 2002, and this was a big factor improving liquidity in 2001.

On the other hand, if an ambitious privatisation law makes it through the parliament this year, this would be very good news for the KSE. Not only would this demonstrate a commitment to economic reform, but privatisation would put new shares into the market and stimulate investor interest.

In addition, the low rate of interest paid on bank deposits is now encouraging investors back into the KSE where dividends are generally much higher. Indeed, interest rates may yet move lower, and that should benefit the KSE.

So perhaps it would not be wise to write off the KSE just yet. The Arab world's second largest stock market had a very good run in 2001 but could still move forward significantly in 2002, and is still a long way short of its all-time high in 1998.