Kuwait's boom is a bubble

The booms and slumps of the stock markets of emerging marking are notorious among investors. In 1998 investors in Oman and the UAE got their fingers burnt; and in the early 1980s many Kuwaitis faced bankruptcy when the bourse crashed.

Last week the Kuwait stock Exchange hit a new all-time high of 4,589.70 points, and is up 93.2 per cent since the start of the year. When any market steps forward to receive the 'best performing stock market in the world' award there should be a whisper of caution, pride generally comes before a fall.

Yes, there will be a huge budget surplus on the back of a phenomenal year for oil prices. We know that, so it's in the stock prices.

Yes there is the prospect of business in Iraq. But the internal stability of this former enemy leaves the commercial outlook in doubt. Also some feel business will bypass Kuwait, no friend of Iraq's for many years, and go to Dubai.

How lucrative will those contracts in Iraq prove to be for Kuwaiti listed companies? Might it not all prove to be a lot of hot air expended by stock brokers?

From an outsider's perspective the KSE is being driven upwards by the flow of funds and unbounded optimism about the future, and has lost touch with historic company valuation criteria. This is the usual sign that a stock market is nearing the top of a boom, though this sentiment can persist for sometime.

Maybe GCC investors should cash out of position in the KSE and put their assets into markets such as the UAE where euphoria looks more justified but is less in evidence.