National Investments Company
- National Investments Company (NIC) is a leading Kuwaiti investment house that made promising successes even under Covid-19 pandemic. Can you tell us about the strategy followed by the company in dealing with the crisis? What policy are you following to balance the activities of your portfolios and those managed by you?
The exceptional circumstances witnessed by Boursa Kuwait and the regional markets in 2020, made us an exceptional strategic investor, as our investment decisions are based on a thorough study to capture good investment opportunities that keep pace with our investment standards.
- Can you tell us about your investments map in 2021 by looking locally at a sector wise, in addition to the Gulf map (please specify the percentage of each sector, then each GCC market)?
Our investment map is highly dynamic as we have several different investment models that follow international benchmarks approved locally and in the Gulf region to suit all investors with different investment orientations and desired risk appetite. For example, we have:
- Local conventional model: It is an active portfolio invests in Boursa Kuwait, and follows a global index applies to local stock market to some extend and aims to achieve weighted risk returns outperform the index in the long term.
- GCC conventional model: It is an active portfolio invests in GCC Stock Exchanges, aims to achieve weighted risk returns outperform the comparative composite index of large and medium market capitalization in the GCC countries in the long term.
- In addition to
- Conventional aggressive local model
- Conventional dividend local model
- Islamic conservative local model
- Islamic conservative GCC model
Based on the foregoing, each investment model has a different investment map in terms of sectors diversification and geographical diversification, to be in line with its investment policy.
- Has the Boursa Kuwait become the only suitable investment base for venture capitalists now, or there are alternatives that you would like to shed light on, and how do you see the Boursa after global institutions became a major partner with the capital of many listed operating companies?
There are still other available investment channels, but the local market is considered one of the best, after the increase in the liquidity levels in recent years and the entry of the foreign investor. The low interest and low real estate returns also led many investments to head to the Boursa Kuwait.
- How do you see the economic measures taken by the State in the face of the repercussions of Covid-19 pandemic? And what is the reflection of the current situation on the stock market? Has Kuwait become in an actual need for a bond and Sukuk market and regulation of debt instruments?
Covid-19 pandemic casted its shadow over Kuwait as well as the whole world where most countries have implemented accommodative monetary policies by cutting interest rates and pumping liquidity into the markets. The Central Bank of Kuwait (CBK) cut the discount rate by 1% to 1.5% instead of 2.5%, which is the lowest level historically, targeting to reduce the cost of borrowing for all economic sectors, including individuals and corporate, to enhance an environment supportive of economic growth and maintain monetary and financial stability.
We believe that the government should take some economic decisions to help small and medium enterprises (SMEs), as they are the entities most affected by the health measures taken by the State.
With regard to the bond and Sukuk market, if we look at the debt market in the world, we find that it is larger than the stock market and has great importance in facilitating credit and providing liquidity needed for the business environment. The existence of an active bond and Sukuk market will add great value to Kuwait market and help in a further regulation of debt instruments.
- What about the volume of the investment assets managed by NIC locally and abroad?
The volume of assets managed by the company amounted to more than one billion Kuwaiti dinars as at the end of 2020 allocated in various Gulf and international markets.
- Are there new investment instruments the company is preparing for the market and its customers? Is it possible for the company to lead an initiative to provide suitable investment opportunities for low-income people?
NIC always endeavors to provide all investment services that meet the desires and aspirations of various types of investors, with ongoing concern to provide financial products that keep pace with the continuous development in the global capital markets in general and the Boursa Kuwait in particular. In 2020, the MENA sector team made extensive efforts to prepare for launching the Market Maker function. NIC has been granted a Market Maker activity license by the Capital Markets Authority (CMA), in addition to applying extensive tests with the Boursa Company to ensure the integrity of the Market Maker’s operating system.
As for the low-income people, NIC funds still provide investment opportunities with competitive returns and do not need huge capital.
There are other products that we seek to offer to customers in the stock markets in the region under study and development.
- When talking about market sectors… Where do you see the investment opportunities most attractive for liquidity? (Please name more than one sector by importance from your perspective)?
As for the sectors, we believe that the operating sectors are always considered the main destination for capitals as they provide dividends in addition to growth opportunities such as the banking and telecommunications sectors. It is worth noting that the energy and petrochemical sector will be one of the most important sectors, especially after markets recover from the pandemic and oil demand returns to pre-Covid-19 levels.
- How do you evaluate the market industry in Boursa Kuwait at the present time? Have the companies that provide the service started to establish an influential footprint for the industry in the stock market, or does it need more time? And what about your preparations regarding activating the approval CMA granted to the company?
The Market Maker function is one of the modern tools in the Boursa Kuwait that is concerned with improving trading rates and reducing the gaps between supply and demand, as we expect trading rates to grow in general. For NIC, we have completed all the procedures required by the competent authorities and we expect to announce the activation of the service very soon.
- It is known that the Boursa is hungry for attractive investment tools. What is your feedback on the delay of the concerned authorities in launching important investment tools such as “Margin”, Margin Trading, ETTING, Exchange Traded Fund (ETFs), etc.? Are these tools suitable alternatives for promoting the market? Or does the market need other tools that should be available?
We are optimistic about the Boursa Kuwait’s new management after being designated, as it is keen to provide advanced products according to the latest developments in the global markets. We appreciate the great transformation that took place in the past period, and we aspire for further advancements, bearing in mind the current conditions that led to some delays.
Additionally, we see it useful to introduce financial derivatives and a short selling policy, which in turn will move the local market to a different stage in line with international standards.
- From your perspective, is speculation still the salt of the market, as it was called in the past? Or it disappeared under the supervision imposed by the CMA on speculative activities?
Speculation is still existing and has not disappeared. It is more concentrated in the main market, and this is normal, especially if the market capitalization and rates of those companies are compared to the premier market companies.
- It is noted that there is a significant segment of investors who depart Kuwait (capital migration) in search of favorable opportunities for their orientations despite the several opportunities available locally. How do you see that?
Since the upgrade of Boursa Kuwait to the global indices, the market has regained the confidence of the local investor. We have also seen a positive start to the stage of localizing foreign investment on the other front. Currently, there may be a transfer of some capital with the aim to diversify investment objectives and reduce risks through geographical distribution.
- What after the upgrade? To what extent has Kuwait become on the global market map after the upgrade and joining the emerging market indices? What are the concerned parties in the capital market system demanding after obtaining the three upgrade cards? Do such upgrades have an impact on NIC as a leading investment company?
These upgrades are a clear indication of the CMA’s success in achieving its strategic orientations that it has been pursuing for several years, and also a success of the efforts and cooperation of all entities and parties relevant to the financial market system. Doubtless, these upgrades have tangible positive impacts. They serve as a confirmation that the capital markets in Kuwait have possessed the required level of regulation that is fair, competitive, transparent and able to protect investors and traders in securities activities on one hand, and the high volume of institutional and foreign investments directed to the Boursa, and to encourage acquisitions by global institutions on the other hand.
- Do you agree with the demand for “screening” or cleaning up the market by excluding companies with poor financial conditions or that are still suffering accumulated losses, with which the shareholders’ rights have evaporated, considering their presence on the Boursa a risk to traders?
We are in the opinion of this screening. During recent years, the regulatory authorities and the Boursa Kuwait have been laying down the legal frameworks and procedures required of these companies to remain listed on the Boursa, which provides protection for shareholders’ rights and enhances investor confidence in the local market. For example, the Boursa Kuwait has the right to stop trading on any security whose accumulated losses amount to more than 75% of the capital, so the company has two options, either to withdraw from the market or increase its capital.
- Do you see in the Boursa attractive operational opportunities to make new acquisitions and mergers during the coming period, and what are the sectors suitable for that?
It is expected to see mergers and acquisitions in a number of areas in pursuit of some companies to achieve what is known as (Vertical Integration), for example, but not limited to:
- Financial services companies that make acquisitions in the FinTech area.
- Telecom companies that acquire technology solution providers.
- Service companies expand the range of their services to clients.
Additionally, we expect mergers and acquisitions to occur in sectors expected to recover after Covid-19, as companies seek to maintain their presence in the markets amid operational difficulties and low liquidity resulting from the repercussions of Covid-19 pandemic, for example:
- Investment companies
- Real estate
- Food and beverages
- How do you see the pace of listings on the Boursa, and does it agree with CMA efforts regarding the link between subscription and listing within a few days after the offering? Is there a room to accommodate family companies and governmental public shareholding companies, or is the time not appropriate?
After the positive changes in the supervisory system and the operational environment of the local market, we are in the opinion that the Boursa is ready to accommodate the state-owned shareholding companies, most prominently oil companies, as well as family companies, as these listings increase the size and diversity of the local market, which will benefit the shareholders and the Boursa, and the national economy in general. As National Investments Company, we have a successful experience in this regard, when we acted as the listing advisor of the Boursa Kuwait Company, which is one of the most successful listing in recent years, and the first listing in the GCC stock exchanges. The listing of the Boursa Company created a milestone in the premier market, and it is one of the encouraging models that deserves to be a case study of the success of listing a company by integration of all surrounding factors and circumstances.