June 12 (Bloomberg) -- Kuwait Stock Exchange is seeking to slow government plans to sell the country’s bourse on concern it remains too weak three years after the credit crisis triggered a $5 billion bailout of financial companies.
“I’m against the way it is to be privatized,” Hamed al- Saif, the director and head of the exchange, said a phone interview from his office in Kuwait City today. “It’s too fast and the stock exchange will be very weak, it should be gradual.”
The government must sell 50 percent of the exchange by the end of this year under the terms of a law approved in February 2010. The remainder is to be sold to Kuwaitis in an initial public offering, al-Saif said.
Kuwait’s benchmark index has lost 9.3 percent this year. Companies are recovering after the global financial crisis forced government to guarantee all local bank deposits in 2008 and approve a $5 billion economic rescue package to help bolster financial institutions.
“You can’t give control of the exchange to the private sector in this situation because most of the companies have problems now,” al-Saif said. “We have to review the law. We have to add value to the stock exchange and correct everything” before selling it, he said.
Nasdaq OMX Group Inc., the second-biggest operator of U.S. stock exchanges, signed an 18.3 million dinar ($66.7 million) contract with KSE in October 2009 to supply it with a trading system and advisory services.
Al-Saif said the government should consider selling 20 percent of the Kuwait exchange to Nasdaq and hand 20 percent to the Kuwait Investment Authority, an arm of the government. Under al-Saif’s plan, a further 20 percent should be sold to the public and 20 percent to the private sector, which could be increased to as much as 30 percent within three years “when the economy and companies will be corrected,” he said.
The exchange has been regulated since March by the Capital Markets Authority, or CMA, the country’s first stock-market regulator.
The law allows listed companies to hold as much as 5 percent stakes in the bourse.
“We’re trying to correct the stock exchange but the CMA says no, leave everything as it is until the exchange is privatized,” al-Saif said. “That is wrong."
Officials from the CMA couldn’t immediately be reached for comment today when contacted by Bloomberg News.
The bourse management met June 9 with Commerce Minister Amani Boresli to discuss how to proceed with any changes to the law, according to al-Saif. Boresli wasn’t immediately available for comment when telephoned by Bloomberg News today.
Privatizing the stock exchange according to the current law ‘‘will tighten controls and makes the market more professional,” said Ali al-Nimesh, an independent Kuwaiti economic analyst. “If you want to bring money to this country, you have to keep it professional and efficient and the private sector needs to play a leading role."
--Editor: Gavin Serkin
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