Investment earning potentials in Kuwait have been largely ignored in recent years by the global and regional financial community, but that outlook is expected to change imminently, believes an investment manager.
Kamco Invest Senior Vice-President Omer Jawaid said there were many reasons why many chose to be underweight in their focus on Kuwait, with the most prominent being the far flashier attraction of money flows in Saudi Arabia, the UAE and Qatar.
Omer also noted that the recent political turmoil in Kuwait, with frequent government changes, caused delays in structural reforms and affected investments within and into the oil-rich country.
With some sort of political stability having been established since the May 2024 ascendancy of Ahmad Al-Abdullah Al-Ahmad Al-Sabah as the latest prime minister, Omer is confident that Kuwait will be getting its long overdue legislative reforms passed soon.
As a result, the government is expected to increase its focus on deploying some of its sovereign fund deposits to be pumped into infrastructure, hospitality, healthcare and housing, which will possibly attract more investors.
Kuwait has significant resources available with one of the world’s biggest sovereign funds, with over US$800 billion and a net asset position that averages 470% of GDP, run by Kuwait Investment Authority.
Its recent discovery in the Al-Noukhitha offshore field, estimated at around 3.2 billion barrels of oil equivalent, will likely contribute to further growth of the national fund.
Furthermore, Omer noted the local government is said to be hastening a decision on the long-awaited new debt law that would enable Kuwait to access global debt markets. Should it materialize in less than 12 months, this could potentially be a big growth catalyst.
“We’re hopeful that the next two to three years could be really interesting, as upcoming developments could be a game changer. This will provide the much-needed growth for Kuwait which has a young population and prudent leadership.”
Stating the nation is heading in the right direction, Omer added: “The Emerging Markets Index hasn’t yet attracted enough attention to invest in Kuwait. This gives an opportunity for the local players to monetize or leverage on this situation ahead of the curve.”
In the meantime, Kamco Invest manages an Islamic fund and two conventional funds. Jawaid maintained the recent uncertainty has caused a cultural shift that is driving financial demand towards more conventional funds rather than Shariah funds.
“It is important to note that Shariah funds have a basic structure which is by no means flawed, but at the same time has limited opportunities. From a holistic point of view, the typical investor would tend to go towards conventional instruments.”
Omer expects this perspective will change over time.
“Looking at Shariah compliant funds compared with conventional fund performances, according to S&P benchmark for the last five to 10 years they were more or less the same. But for investors looking at a 10 to 15-year investment horizon, Islamic funds tend to do better than conventional funds.”
