Markets

Transforming Kuwait

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Banker Middle East sits down with Khaled AbdulRazzaq AlKhaled, Chief Executive Officer of Boursa Kuwait, for an exclusive insight into the exchange's strategy in propelling the Kuwaiti market to new highs

editor's pickTuesday 06, November 2018

What led to the introduction   of a Boursa Kuwait’s new   Rulebook earlier this year? 

 Prior to the take-over, the exchange was regulated by various   decisions issued by Kuwait Stock   Exchange (KSE) setting forth rule and   regulations with respect to selected   topics. By issuing its rulebook, Boursa   Kuwait provided efficient and wellregulated   market place satisfying the   requirements of the Capital Markets   Authority’s. Boursa Kuwait’s aim is to   provide issuers, brokers, listed companies   and all market participants with attractive, efficient and well-regulated market and to   define roles and responsibilities.  

In addition, Boursa Kuwait Rulebook   introduced mechanisms with respect to   the access the activities and services of   the exchange, re-enforcing fairness and   transparency towards investors, which is   fundamental to implement sound practices, orderly functions of the exchange and sustain   confidence in the overall financial market.   The Rulebook encompasses   transformational changes such as a   three-tiered segmented market, the   introduction of new market-capitalised   indices and circuit breakers on securities   and indices to curb volatility, as well as   entirely new listing requirements that   was made effective 1 April 2018. 

 This phase marked a milestone within   Boursa Kuwait’s mission to develop a liquid, reliable and sound capital market providing   issuers with efficient access to capital, and   investors with diverse return opportunities, which is set to see Boursa Kuwait fortify   its position as a leading regional exchange.   The new market segmentation is a   particularly major step, creating a ‘Premier’, a ‘Main’ and an ‘Auction’ market, each with   unique characteristics and obligations. In   response to this segmentation, Boursa   Kuwait also introduced new marketcapitalised   indices, which represent the   segmented markets. All sectorial indices   have been reset to reflect the start of the   new markets.   In light of these major developments   and changes, the Boursa Kuwait Rulebook, was also amended to include all the listing   requirements reflective of the market   segmentation.

Moreover, a circuit-breaker   system on securities and indices has been   put in place as a measure to prevent   potential market disruptions.   Boursa Kuwait has an unequivocal   commitment to pursuing best practices   and increasing transparency for the   benefit of their stakeholders. Its strategy   focuses on developing the overall market   status and addressing the needs of   market participants through the provision   of investment tools, restructuring the   market to increase its competitiveness   and liquidity, and attracting investments   from local and international investors.  

Are we likely to see further regulatory   overhaul and reforms?  

Given the nature of the exchange   operations in any given market, there   is always room for further regulatory   overhaul’s and reforms. For the Kuwait   market in particular, we will continue to   develop the overall market status in terms   of rules and regulations and products and   services, while developing the overall   framework of the exchange.   Moreover, Boursa Kuwait recently   introduced the Over The Counter market (OTC), which serves as a trading platform   for companies that are not listed on   Boursa Kuwait. OTC transactions will be   carried out through licenced brokerage   offices working under Capital Market   Authority bylaws and Boursa Kuwait rules   relating to the OTC market.  

The newly introduced market will create   a transparent environment by bringing   buyers and sellers together using fully   supervised mechanisms and will adopt the   clearing and settlement procedures.   Boursa Kuwait is also in the stage of   introducing the third and fourth phases of   market developments, which will include the   introduction of short selling, REITs, trade at   last (TAL), off-market trade enhancements   two and stock swaps in 2019, and   moving forward, we will also witness the   introduction of cash-CCP, qualified brokers, margin lending, equity repos, derivatives CCP, index futures, security options and   exchange traded funds (ETFs). 

 In June, this year FTSE Russell   announced that its Industry   Classification Benchmark had been   licenced by Boursa Kuwait for all equity   stocks listed on its markets. What was   the strategic incentive behind this   adoption and what effect will have in   the long-term?  

Adopting the FTSE Russell Industry   Classification Benchmark ensures that   our exchange will adhere to international   standards and increase transparency as well   as adopt universal benchmarks, allowing   the exchange to flourish and expand.   Our goal to achieve worldwide status   and becoming a regional leader just   became a little closer with this step, an important milestone in our journey   and goal of developing a liquid, reliable   and sound capital market providing   issuers with efficient access to capital, and investors with diverse return   opportunities, evolving into a leading   regional exchange.  

Following the announcement that   MSCI would include the MSCI Kuwait   Index in its 2019 Annual Market   Classification Review for a potential   reclassification from frontier markets   to emerging markets status, how likely   we will see Boursa Kuwait’s accession   to emerging markets status?  

The reclassification from frontier   to emerging markets is a major   achievement for any country, which   typically brings with it large capital   inflows from international investors.   The State of Kuwait is a nation that   is fully equipped to be considered   for the reclassification and with our   ongoing efforts to continuously develop   the infrastructure of the exchange, and   solidify its position on an international   level, I am confident that Boursa Kuwait   will reach the emerging markets status.

How has Boursa Kuwait sought   to establish a robust corporate   governance framework?  

Our efforts towards establishing a robust   corporate governance framework initiated   from the company’s internal culture and   approach, in compliance with Capital Market   Authority regulations and requirements, while   also maintaining focus on accommodating the   needs and expectations of all stakeholders.   By building a robust corporate   governance framework we aim to   develop all policies, procedures and   regulations in relation to governance, and   more importantly to build the culture of   governance across all company sectors.   Within this governance framework we   focus greatly on creating independent   regulatory functions, and enhancing   levels of accountability, responsibility   and transparency.  

Accordingly, the framework has been   established with the aim of applying policies   and procedures, and the formation of a   committee made up of the company’s board   members, while taking into consideration   the competencies and expertise required   from all members of the committee.   Moreover; Boursa Kuwait invested   tremendous efforts in identifying functions   and responsibilities of each member of the   board and the executive management, to   ensure efficient coordination amongst all, in   addition to outlining privileges and authorities   delegated to the executive management.  

Boursa Kuwait recently received   admission as a full member to the   World Federation of Exchanges. What   does this membership admission   mean for the exchange?  

The WFE membership is an important   point of reference for many international   investors. The full membership status   reflects Boursa Kuwait’s commitment to   implement the highest standards and   international best practices.   Our aim is to become the leading stock   exchange in the Middle East, which falls in   line with our nation’s 2035 vision, for which   one of the key objectives is to establish   Kuwait as a regional financial hub, and the   full membership is surely a significant step   towards achieving that goal. 

What was the reasoning behind the   launch of the new digital educational   portal, Boursa Academy Online?  

The platform was successfully launched in   September and is one of Boursa Kuwait’s   important milestones.   The aim of Boursa Academy Online   is to improve capital market knowledge   and educate investors on a wide range   of relevant topics, ranging from how to   trade, common investment mistakes as   well as risks of investing, to enable them   to make informed investment decisions.   From the day, it was launched, the   online portal has provided educational and   training facilities such as ‘Market Watch’, ‘Virtual Trading’, ‘Statement of Account’, ‘Portfolio’, among other, targeted to   investors of various experience levels.  

The launch of the ‘Boursa Academy   Online’ is testament of Boursa Kuwait’s   long-standing commitment to develop   a reliable and sound capital market. Its   goal is to ensure that individual investors   are equipped with the right tools and   information so that they are confident   when getting involved in trading and are   aware of the choices available to help   them make investment decisions. The   academy also aims to promote financial   literacy among the Kuwaiti public more   generally, which will in turn help increase   investment in the local capital market.   With this new educational offering, Boursa Kuwait addresses the need to   bridge the knowledge gap in trading and   financial know-how, which is one of the   main factors driving individual investors   to participate in the capital market.

The   academy will act as a trusted source of   information where members can access   state-of-the-art tools and resources.   Boursa Academy Online is also an   important platform to educate the   recent development or updates to the   financial markets which are constantly   evolving. Therefore, it is important   for institutions like Boursa Kuwait to   ensure individual investors are kept   informed of the new trends and risks   associated with investing. We see it as   our mission at Boursa Kuwait to help   build a sustainable financial environment   through continuously improving Capital   market literacy, thus enabling investors   to maintain an in-depth understanding of   the different structures and procedures   within the capital market so they can   better asses their goals.  

Additionally, the portal delivers training   solutions to help beginners—such as   university students—understand the   basics of investing and the instruments   available in the market. The content is   delivered in an Information rich platform.   Pursuing best practices and increasing   transparency for the benefit of its stakeholders   is part of Boursa Kuwait’s mission to evolve   as a leading regional exchange. To this end, its strategy focuses on developing the overall   market status and addressing the needs of   market participants through the provision of   investment tools, restructuring the market   to increase its competitiveness and liquidity, and attracting investments from local and   international investors.  

What is your personal management style? 

Managing an exchange requires a   complete hands-on approach on all fronts.   But that is not possible to do without   an efficient, experienced and strong   team. At Boursa Kuwait, that is how   the operation is managed; as a team. To   date, by allowing every experienced and   specialised person to do their job while   offering the support required to ensure   it’s done properly, is what got us to where   we are today.   I am proud of each and every team   member across the entity, and the   success we have witnessed today is   due to their unwavering diligence   and commitment.     

TAGS : MSCI Index, Boursa Kuwait

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