In an effort to stay true to it’s stated objectives, ‘Direct credit policy to assist social and economic progress’ , the Central Bank of Kuwait met with banks and financial institutions last week. The purpose of the meeting called for by the CBK Governor Shaikh Salem Abdulaziz Al-Sabah was to inform the attendees that the CBK will extend all ‘necessary aid’ to institutions facing problems stemming from the current global credit crisis. The Governor also reassured his audience by stating that the government will not allow Kuwaiti institutions to fail. Although the CBK oversees both the Banking and Financial sector, they are not treated equally as financial institutions cannot access CBK liquidity.
The three institutions facing trouble and being supported by the CBK include:
- Global Investment House . The stock has returned -43% from its 52 week high and currently has a market cap of KD 875 mm. [Bloomberg symbol: GLOBAL.KK EQUITY]
- The Investment Dar. The stock has returned -36.5% from its 52 week high and currently has a market cap of KD 639 mm. [Bloomberg symbol: TID.KK EQUITY]
- Al-Madina. The stock has returned -54% from its 52 week high and currently has a market cap of KD 98 mm. [Bloomberg symbol: ALMADINA.KK EQUITY]
I think it will be interesting to see how things play out within the next few months and how this will effect the markets. I also think that it is unfair for institutions that have not been prudent to receive special treatment and bailout packages while those who have behaved merely get a pat on the back. For those of you invested in the local markets, expect downward pressure for the upcoming months as more dirt is uncovered. I hope that the markets punish the feeble and reward the strong, as they should.
All numbers are as of Oct 16 closing prices.
 Central Bank of Kuwait. www.cbk.gov.kw