Second phase of market's strategic reformation from April 1

KUWAIT: Boursa Kuwait is poised to implement the second phase of its strategic reformation on April 1. — KUNA file photo

KUWAIT: On April 1, Boursa Kuwait is set to implement the second phase of the market's strategic reformation. The first phase, implemented last year, set the bourse on the path with the introduction of T+3 settlement cycle in May of last year and then the promotion to 'secondary emerging market status (commencing September 2018) by FTSE Russell.

Now Boursa Kuwait will introduce from 1 April 2018, market segmentation. According to January 2018 Strategy Note from NBK Capital, the plan, "seems to be aimed at achieving two major objectives. One is to create a blue-chip mid to large cap segment of the market that comprises market leaders in terms of size, liquidity, transparency, and governance which will effectively be the Premier Market. The Second would be a market of small to mid-size companies that are relatively liquid and well governed."

Specifically, market segmentation will divide the market into three segments: Premier Market, Main Market and Auction Market. Segmentation will be based on certain criteria related to liquidity, market capitalization, price to par ratio, years of operations plus disclosure and compliance with the terms and conditions of listing.

Premier market

"Premier Market" forms the elite category, which will be occupied by high caliber companies with high liquidity and medium to large market capitalization requirements. Companies in this segment are subject to annual reviews and must hold quarterly analyst conferences and offer disclosures in both Arabic and English.

To qualify for the premier market, company should have been listed on the course for no less than two years; capitalization should meet minimum threshold; liquidity should meet minimum requirements, company's average share price should not be below its nominal value for each of the two years preceding the annual review and company should have been operational for at least 7 consecutive years.

Main market

Companies which are not qualified for the "Premier Market" category will be classified under the "Main Market", those companies need to maintain minimum level of liquidity in accordance with all basic requirements for the "Main Market". Companies in this segment are subject to annual reviews to prove its performance throughout the year to be able to remain in the segment it falls under or to be re-classified to the other segments.

Auction market

The "Auction Market" will include companies with low liquidity regardless of its market capitalization. Companies in the "Auction Market" will not be part of any index. Trading in the "Auction Market" will trade following an auction trading mechanism with no continuous trading.

Market segmentation is a common practice worldwide, many reputable world exchanges such as the London Stock Exchange, Deutsche Borse and NASDAQ have similar markets. A new set of Indices will also be implemented. The new Indices will be market cap weighted and will replace all of the current indices. There will be a General Market Index covering companies listed in both the Premier and the Main markets, a Premier Market Index and Main Market Index. In addition, indices for each of the 13 market sectors will be as follows:

1. Oil & Gas Weighted Index

2. Basic Material Weighted Index

3. Industrials Weighted Index

4. Consumer Goods Weighted Index

5. Healthcare Weighted Index

6. Consumer Services Weighted Index

7. Telecommunications Weighted Index

8. Utilities Weighted Index

9. Banks Weighted Index

10. Insurance Weighted Index

11. Real Estate Weighted Index

12. Financial Services Weighted Index

13. Technology Weighted Index