The Kuwait stock market liquidity has remarkably increased in the first four months of 2013 backed by several incentives on the market and and drastic decline in bank deposits interest rates, Al Shall Economic Consultants Company's Economic Research Unit said in a report released Saturday.
"Liquidity of Kuwait Stock Exchange measured by the average daily trading value during the past four months of the current year 2013 rose by about 62 percent compared with the average daily trading value for 2012," reads the report.
"Market attractiveness is attributed to several reasons including the banks' liquidity indigestion which drastically reduced the deposits' interest, the high rise in real estate prices, the investment housing activity, and the considerable decline in the Kuwaiti shares prices, especially the cheap ones, since the beginning of the financial crisis." While the rise in market liquidity represents expansion in demand, the rise in stocks prices becomes a balance factor for the demand expansion.
The report made clear that some stock price rises are a healthy phenomenon and some others are not.
"The rise in prices justified by return expectations from operation is a due award; likewise, the rise to bridge the gap between a fair price and the very low price below its fair value due to the financial crisis conditions is also deserved rise, "But when liquidity is directed towards a few stocks unsupported by distinguished performance expectations, with stocks rotating and rising without the restraint of reaching their fair price, liquidity becomes harmful." The report cautioned that the market liquidity in the past four months of the current year indicates clearly dominance of harmful trading.
While it achieved some needed liquidity like rewarding the serious companies and bridging the gap for the unfairly dealt with stocks, half of it at least went for gambling and adventure. Figures indicate that about 66.5 percent of trading value, or KD 2.34 billion, went for 30 companies, which are the most liquid and represent about 48.9 percent of capital-market value of all listed companies.
"However, 21 companies within these whose market value does not exceed 3.3 percent of the market value of the companies, or KD 1 billion in market value out of KD 30 billion, captured46.8 percent of all market trading value or KD 1.64 billion. This means their shares achieved a turnover average by 160 percent in four months." The report noted that the performance of Kuwait Stock Exchange (KSE) for the last week was mixed, where the traded value index, and the transactions index showed an increase, while the traded volume index.
"The general index showed a decrease, AlShall Index (value weighted) closed at 462.2 points at the closing of last Thursday, showing a decrease of 0.9 points or about 0.2 percent compared to the end of the previous week, and an increase of 24 points or about 5.5 percent compared to the end of 2012."