Saud wrote a post yesterday about the significance of breaking the 200 day moving average of the Kuwait Stock Exchange. He cited the “Price” index as opposed to the more relevant “Weighted” index. Bears would tell you that today we broke a critical level on the Kuwait Stock Exchange price index and the trend says we shall plummet. Although they have a point, it isn’t as doom and gloom as it may seem.
Don’t get me wrong; I believe what is happening to the Kuwait SE is depressing. Oil is above $80, stock markets across the world are reaching highs, the global economy is recovering, even Dubai’s stock market is surging, money supply in Kuwait constantly registered high figures, and the biggest company on the KSE is “supposedly” on the verge of being sold for a figure with numerous zeros to its right. Any sane analyst would tell you the Kuwait Stock Exchange should be trading at highs right now. The billion dollar question is, why isn’t it? Why are we going down? Why is it that volumes are this thin. Shouldn’t lower prices lure investors into buying? Aren’t we supposed to see volumes pick-up as prices go down? Is our stock market too dependent on certain individuals who were caught in the financial mess? Is the Zain deal going to close? We know the answers to these questions, but for some reason don’t want to believe them.
I drifted a lot in my post, and I will now return to my initial question and answer: Did the Kuwait SE break its 200 DMA? Yes and No. How? It broke the 200 DMA on the price index, but not on the weighted index which I view as more appropriate because it is moved by the biggest market cap companies. The 200 DMA on the KSE’s weighted index is 410.82. It will only take 5.6% of downside to break it. Will we break it? I hope not.
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I don’t know the answer to those questions. Would love to see an analysis of why this is happening. Is it all about the possibility that the Zain deal goes sour? Is this really what’s directing the market?
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Keynesian Reply:
October 27th, 2009 at 5:02 pm
I believe the Zain deal will not close. You can refer back to several previoys posts addressing that issue. Also, our stock market is very dependent on certain individuals. We don’t have stock market laws enforces by a Capital Markets Authority. Such authority is fundamental to the future of the Kuwait SE and our economy in general as it would supposely enforce the laws and go after manipulators and insider traders.
Lets be realistic for a second: Our stock market is divided into 4 or 5 conglomorate groups. These groups usually have one or two operating company and nine companies dependent on it. For example, NIC group has Zain and several investment companies such as NIC, Sahel, Al-Mal, and the list goes on. Kuwait projects group has Burgan, KAMCO, and used to have Wataniya Telecom. And the list goes on. This is unhealthy. The way the 9 investment/ paper companies make money is partially because they benefit from insider info on the major company and each other. This is why we have to push for a Capital Markets Authority because these beneficiaries will never do so.
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Well thank God they’ve been making some headway to that end lately with the financial & economic committee in the parliament. They’re going to vote on it soon INSHALLA!
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The order of my comments is off :S
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Keynesian Reply:
October 28th, 2009 at 4:26 pm
I hope they do. My only concern is that we have always reached the final round before it gets enacted and all of a sudden everything collapses. Search in google capital markets authority in Kuwait (in arabic) and laugh/cry at the headlines saying it will soon be passed. I found one from when Mr. Abdulwahab Al-Wazzan was a minister and much more.
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good point Keynes, but I think that technicals is more sentimental rather than based on the company’s actual financial position. So in this matter I prefer to you use the price index as most investors follow it, but I prefer using the weighted index for everything else.
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