The usual remarks i often hear from traders in Kuwait are that the Kuwait Stock Exchange is ‘unique,’ ‘uncorrelated,’ or ‘irrational’ are usually unproven and baseless statements. During stressful times in the financial markets many traders in Kuwait presume that the Kuwait Stock Exchange is not correlated to world markets and that events happening abroad do not effect the outcome of the local economic system, these are false accusations.
This ideology is felt across Kuwait, and the Gulf, as the US Dollar tumbles to new lows and global markets experience the credit crunch local traders just shrug off the news and claim that “it wont effect us.”
Traders MUST acknowledge that ALL markets are controlled by the same 2 simple factors, greed and fear. These two simple factors control every economic market cycle. The insight that emotion (greed and fear) can override rational thought during decision making is the main component, among others, in the psychological barriers moving the markets.
GCC markets are LOW correlated compared to international markets and even among themselves.
Kuwait depegging from the US Doller was a smart move which in my opinion was a move that the rest of GCC should have done, but thats just me.
Inflation is killing everybody in 2008, Governments are encouraging non-Oil sectors and fighting liquidity in an attempt to lower inflation.
I think the GCC Markets are best world wide because of the Petrodollers Tsunami pouring back into the GCC and the large infrastructure projects that is sweeping the area.
GCC Markets have about 718 listed companies with a market cap of $1.3 Trillion.
80% of GCC population is under 25 and population grwth is growing at a rate of 3 to 4% annum.
Oil prices budget set price is only $40 a barrel, anything over that is great.
Budget surplus is enough to cover the whole region for 7 more years if we stopped pumping Oil.
Looking at the other markets, I think GCC is doing pretty good, don;t you think?
Justathought - There are many strong statement you have said but I would like to stress my point that ALL markets operate in the same way. Greed and Fear.
Your comments were well thoughtout and I would just like to comment (on your comments):
[80% of GCC population is under 25 and population grwth is growing at a rate of 3 to 4% annum.] This is not a good sign if markets do not grow and mature at the same pace. We will be experiencing unemployment, pension plan problems, and land scarcity in the near future.
[Oil prices budget set price is only $40 a barrel, anything over that is great.] This is poor financial accounting on the part of the state. If oil prices are trading at double those prices your infact limiting yourself to a proper budget.
[Budget surplus is enough to cover the whole region for 7 more years if we stopped pumping Oil.] With the plans for the government to pay bad debts, subsidies, and issue higher salaries to employees all along with the public scandals and increasing rate (ranked higher than previous year) corruption in the country i doubt we could continue for a year.
Also for the issues regarding inflation see my previous post regarding BBH’s analysis of kuwait, inflation & the revaltuation.