Why is KIPCO selling its assets? First they sold Wataniya Telecom to Qtel then Sadafco. I am not sure what’s the status of Showtime which they were hoping to sell for a while now. What’s next? And what is this all about? There are few theories. The official response from KIPCO is that it is normal disposal of investments for attractive returns and realignment of strategy. But this did not stop the speculation. Some say KIPCO is attempting to divest out of Kuwait in light of increased political pressure and scrutiny because of its close connections (owned by the son of the Emir). Others take the divestment to be a negative outlook on the Kuwaiti market which worries many.
So is a negative outlook justified? According to recent Merrill Lynch report the answer is no. The chart below shows forward P/E ratios and current account balances relative to GDP. Accordingly Kuwait’s stock market is one of the most attractive in the region. This is based on large relative current account surplus (driven by oil revenue) which indicates higher potential economic growth. In addition, valuation is relatively inexpensive based on forward price earnings ratios. So why is KIPCO selling out? That’s anyone’s guess.