CEO outlines NBK Capital’s strategy in interview with Sky News Arabia
KUWAIT: Faisal Al-Hamad, the Chief Executive Officer (CEO) of NBK Capital Company, said that the company has a new strategy for the next three years. It follows the needs of the company’s customers and focuses on three sectors: asset management, investment services and financial intermediation, indicating that the Saudi market will have a large share of investment in the region.
Al-Hamad said during an interview with Sky News Arabia that the largest bond issue in Kuwait for Burgan Bank would be announced soon, with a value of nearly half a billion dollars.
Al-Hamad said that NBK Capital has two companies to be listed on the Kuwait Stock Exchange as part of its efforts to be the first destination for successful companies wishing to be listed on the Kuwait Stock Exchange. Al-Hamad pointed out the successful acquisition of Kuwait’s 4-sale company as part of the technology sector.
As for the changes in the Kuwaiti stock market, Al-Hamad said: “The development witnessed by the stock market has contributed positively to attract companies to the listing, especially the new regulations that encourage listing.” For example, by eliminating profitability requirements, it is possible for emerging companies with good growth prospects adding that joining the global indices will increase the interest of private companies and investors in the Kuwaiti market. “
“The Kuwaiti economy has witnessed a remarkable improvement in 2018,” he said. “We expect the Kuwaiti economy to grow by about 3 percent,” he said. “This is a good growth under these economic conditions in the region.”
On the general budget of the state, he said: “The rise in oil prices improves the public budget despite the large increase planned for spending in the budget this year, with the need to draw from the general reserve, expected to shrink this year to 1 percent of GDP, (Considering our outlook for the Brent price at $70 a barrel – the average of the fiscal year).”
Question: Tell us about NBK Capital new investment strategy in 2019?
Al-Hamad: We have a strategy for the next three years, taking into account that the company renews its strategy annually to suit the conditions of the renewable market, but our strategy follows the needs of our customers and our focus on the three sectors we work in is asset management, investment services and financial intermediation. In terms of investment in the Gulf markets. The Saudi market will have a large share of investment. In terms of investment in private companies, we completed this month the acquisition of Foursale, a Kuwaiti company operating in the technology sector. We are currently conducting a comprehensive review of investments locally and regionally through our private equity funds. Outside the region, there is strong demand for investment in the real estate sector of some European countries, as well as a high demand for diversification of clients’ investments outside the region.
In terms of investment services, we will continue our path in terms of listings and bonds. We will soon announce the largest bond issue in Kuwait for Burgan Bank with a value of 150 million Kuwaiti Dinars (about half a billion dollars).
Question: As the National Investment Company has a leading role in listing the largest companies in the stock exchange, are there new listings in the stock exchange in 2019?
Al-Hamad: NBK Capital is seeking to be the first destination for successful companies wishing to be listed on the Kuwait Stock Exchange. During the year, NBK Capital Company listed Kuwait Holding Company as the first company to be listed on the first market under the new stock exchange regulations. The listing came after a successful private placement of 35 percent of the company’s capital with a transaction size of KD 55.8 million. The offer was highly interactive, with demand exceeding 230 percent of the offered shares and attracting more than 1,000 investors. We are proud of NBK Capital for investing in this important transaction.
NBK Capital has two private companies being processed for listing on the Kuwaiti bourse. Both deals are in the early stages of preparation and are unlikely to be listed in 2019.
Question: What is your assessment of the performance of the Kuwaiti economy, was it satisfactory or not, with clarification of this? What are your expectations for the Kuwaiti economy during 2019?
Al-Hamad: The Kuwaiti economy witnessed a remarkable improvement in 2018. We expect growth of 2.8 percent for non-oil activity and 2.5 percent for oil production in 2018, leading to an increase of 2.6 percent in GDP. According to official data, real GDP rose by 0.7 percent year-on-year in the first half of 2018, despite 2.2 percent decline in oil production in the same period as part of OPEC’s commitment to reduce production. Non-oil GDP grew by 4.9 percent year-on-year in the first half of the year, boosted by good performance in communications, manufacturing and utilities.
For our 2019 projections, we expect total growth to be close to 3 percent, which is a good growth under these economic conditions in the region. With regard to the financial situation, the increase in oil prices contributed to the improvement of the general budget despite the large planned increase in spending in the budget this year, with the need to withdraw from the general reserve. This year’s deficit is expected to shrink to 1 percent of GDP, given our expectations for the Brent crude at $ 70 a barrel (the average of the fiscal year).
Question: Do you feel that the stock market has become attractive to the inclusion of more companies, ending the era of withdrawals that have been seen for some time?
Al-Hamad: Certainly, the noticeable changes on the Kuwait Stock Exchange are positively contributing to attracting companies to listing, especially the new regulations that encourage listing. For example, by removing profitability requirements, it is possible for emerging companies with good growth prospects to raise capital and be listed on the Kuwait Stock Exchange. In addition, joining the global indices will increase the interest of private companies and investors worldwide in the Kuwaiti market.
The stock market in 2018
Faisal Al-Hamad said the performance of the Kuwait Stock Exchange in 2018 was fairly good by introducing and developing several tools and systems that helped attract investors to trade in the stock exchange, including the division of the market, which contributed to overcoming several challenges such as liquidity decline on listed companies in the first market The lack of an attractive source base, and the low efficiency of information, in addition to addressing the shortcomings of the rules of listing. The division of the market was aimed at encouraging the inclusion of private and government companies through several proposals and with the aim of creating more orderly channels of capital movement.
The KSE also witnessed a number of development and modernization programs at various levels, including the launch of the OTC trading system which regulates the trading of companies that are not listed, withdrawn or written off from the official market. The new mechanism has created the possibility of trading through an advanced automated trading system Hand trades continued for decades. We believe that the launch of this system contributes to attract companies and customers to trade through the platform managed by all professionalism and transparency to follow up stock prices as well as the development of clearing mechanism and settlement.
A step in the right direction
Faisal Al-Hamad expressed the readiness of the stock exchange for the potential upgrade of MSCI Emerging Markets next year as a step forward to consider upgrading the market to emerging markets by 2019. MSCI highlighted a number of positive initiatives implemented by the Kuwait Stock Exchange recently in the market reform and development plan , Including simplifying procedures for opening accounts and developing legislation and regulations for trading, clearing and custody of securities. MSCI announced in June 2018 that it would add Kuwait to its annual review list,
We believe that the addition of the Kuwait Stock Exchange to the annual review list is a step in the right direction, bearing in mind that the final decision is based on MSCI consultations with market stakeholders, including investors, brokers and custodians. There is no doubt that these consultations will be essential in determining whether Kuwait will receive the promotion or will remain on the checklist in the following years.
Analysts estimate that passive flows will be around $1.7 billion if upgraded by MSCI, higher than the $900 million market-induced inflows from the FTSE. These flows usually reach the market after approximately one year of promotion in accordance with the date of application. Many international funds with active managed funds track MSCI Emerging Markets indices and their managed assets reach about $1 trillion, which could help increase market inflows in the event of an upgrade.