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Kuwait’s stock exchange outpacing Saudi Tadawul’s race to IPO bid

While Saudi’s stock exchange Tadawul could be gathering the most attention as it prepares to sell a 30% stake this year in preparation to host part of Aramco’s 5% share sales, it is Kuwait Boursa that is taking strong and measured steps towards its own IPO.

Kuwait Boursa split

Ahead of its end of year IPO, Kuwait’s Stock Exchange plans to divide its stock market into three market segments from April 1, 2018, aiming to attract liquidity for investors, Abdulrahman al-Failakawi, Capital Markets Authority (CMA) representative, said last week.

The three market segments will be known as the premier market for larger and more liquid listed companies, the main market and the auction market, and all will replace the current market.

“Kuwait, which aims to list its stock exchange and will enter the FTSE secondary emerging market index in September, is trying to reform its stock market which has suffered from low liquidity and de-listings in the past,” said Reuters recently.

Watch: Kuwait rushing to beat Saudi IPO- What is it selling and why?

The IPO race

Kuwait’s boursa became official in the early 1980s, and currently has a market capitalization of about $90 billion, according to Reuters, compared to Tadawul’s $440bn, the largest in the region.

Kuwait was classified as an emerging market by index provider FTSE Russell in September 2017 when it denied the classification to Tadawul but did say that in March 2018 Saudi will earn secondary emerging market status after an assessment.

The competition between Kuwait’s Boursa and Saudi’s Tadawul is on whom will become the second in the GCC after the Dubai Financial Market to raise cash through an IPO.

“There is lots of progress on our end, as we already began the first phase of our marketing development last May and are currently in the trial testing in relation to market segmentation and the upgrade to emerging market status that will put the Kuwait Boursa on the international map,” said Kuwait Boursa Vice Chairman Mishaal Al-Usaimi.

“We are working on performing on an operational level in terms of launching new products, highlighting the importance of liquidity, also as preemptive talks towards launching international derivatives and other products important for market development.”

Read: The GCC IPO avalanche 2018: More than 2 dozen companies to raise funds

He told Bloomberg the Boursa just announced its first yearly results showing $11.67 million.

“We have signed with our international operator and by end April we should have a clearer path towards an IPO by end 2018,” said Al-Usaimi.

Kuwait Boursa hired a consortium led by Tri International Consulting Group to advise on selling as much as 44% of it to a foreign exchange operator.

In May 2016, Saudi Tadawul hired HSBC Saudi Arabia Ltd. as a financial adviser for its IPO which could raise more than $500 million  for a 30% stake in the company, Bloomberg said.

Watch video on why Saudi Aramco IPO will be delayed to 2019

Kuwait Boursa performance

According to Bloomberg, the nation’s benchmark index has 156 members, at least 40 of which have been unchanged since 2006.

“The gauge last year rose 11%, the most since 2013,” it said.

The share sale in the exchange will consist of an offering as much as 50% to the public and up to 24% to state entities, the CMA said recently.

Two or three companies may sell shares through IPOs that could raise about $266 million this year, the exchange’s Chief Executive Officer Khaled Abdulrazzaq AlKhaled said at a conference in Dubai.

According to Kuwait press agency KUNA, Boursa Kuwait ended trading last Sunday with mixed boards as the benchmark went down by 2.73 points to reach 6,757.5 points.
“The Weighted Index went up by 1.1 points same as the KSX 15 index up by 7.9 points,” said KUNA.

“The value of trades reached around $44.7 million with the volume being at 59.4 million shares done through 2,578 deals.”