Kuwait Stock Exchange begins screening tests for foreign clients’ accounts

While the countdown to the promotion of the Kuwait Stock Exchange started by Morgan Stanley Corporation (MSCI), to join its index of emerging markets at the end of next month, official sources revealed that the Capital Markets Authority is scheduled to complete today with the Kuwait Stock Exchange and the Kuwait Clearing Company the upgrade tests, which this time related to the system Sorting foreign clients’ accounts.

The sources indicated to the Kuwaiti newspaper, Al-Rai, that the brokerage firms have been informed of the continuation of conducting tests aimed at handling all operations, training brokers on them, and completing purchases, in order to ensure the safety and readiness of the systems, and their ability to receive inflows of foreign investors ’money, and to activate promotion.

She indicated that the tests conducted with the brokerage firms recently showed satisfactory results for the Capital Markets Authority, while it indicated that there is an additional need for some amendments, most notably controlling numbers and balances.

MSCI announced last weekend that it intends to gradually delete Kuwaiti securities classified in the MSCI Frontier Markets 100 Index. The semi-annual period next November, indicating that this comes in the context of the reclassification of Kuwait.

The sources emphasized that the stock exchange management is working to ensure the readiness of its systems, clearing systems and the settlement cycle to keep pace with the injection of the billions of liquidity promotion towards the required shares, pointing out that there is more than one plan to absorb the pressure, all of which will be ready on time to ensure that purchase requests are met and executed smoothly.

On the other hand, sources reported that the launch of the “NETTING” service, or what is known as net transactions, was postponed until after the actual entry of foreign investors, justifying this by the need for more tests to ensure that the application is without any negative impact on trading systems.

Net transactions, or the application of flexible settlement to investors, is defined as that if an investor executed a purchase order and then sold the shares again in the same session with a profit margin, he is not obligated to pay the full value of the purchase transaction, but rather gets the profit margin achieved for him without paying the total deal, And vice versa, if an investor made a purchase and then sold in the same trading session with a margin of loss, he would not be obligated to pay the full value of the deal, but rather pay the margin of loss.

On the difference between Kuwait’s reclassification from the MSCI sub-emerging markets index to the emerging market index, and the activation of the upgrade, the sources indicated that the reclassification will take place in one step as part of the semi-annual review starting from the market closing on November 30, and that after the stock market closes, investors will pump Foreigners invested funds in the local stock market, which is approximately $ 2.8 billion, according to the expectations of international institutions.

As for the activation of the upgrade, it will be on the first of December, and what is meant by the activation, is that foreign investors will evaluate their entry operations into the Kuwait Stock Exchange and their investment centers on the next day, and make their investment decisions based on the results of this evaluation.

It is noteworthy that MSCI indicated at the end of last week that during this transitional period, the list of components of the “MSCI Frontier Markets 100” index, other than the securities classified in Kuwait, will be reviewed according to the methodology used in the index.