Business | Markets

Kuwaiti minister, lawmakers united in flaying court order halting trading

Decision to suspend share trading 'wrong and dangerous' and will have grave consequences for the market

  • By Jumana Al Tamimi, Associate Editor
  • Published: 22:55 November 13, 2008
  • Gulf News

Dubai: Two Kuwaiti ministers, several MPs and eminent economists all had one thing in common.

They were all united in flaying the first court ruling of its kind in the country that suspended trading on the stock market yesterday as "wrong and dangerous". The spark being the downslide in the bourse and huge losses due to fallout from the international financial crisis.

In a statement carried by the Kuwaiti news agency, Finance Minister Mustafa Al Shimali described the suspension of trading as "dangerous".

"The consequences of this court order will be grave," Shimali added. However, he continued that "we respect the court's decision, as government we have to execute the order."

Kuwait's Court of First Instance ordered yesterday the suspension of trading on Kuwait Stock Market, the second largest in the Arab world in term of market capitalisation.

The suspension, which will be in effect until a suit filed is looked into on November 17. The lawsuit was filed by attorney Adel Al Abdul Hadi on behalf of two stock brokers who wanted to halt the recent steep declines in the stock market.

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State-run Kuwait Television said all trading was suspended within an hour of the court's ruling.

The ruling was hailed as a triumph by many traders frustrated by what they said was government reluctance to step in and curtail steep losses that have resulted in a roughly 30 per cent year-to-date decline in the exchange. "We are elated... this is a historic ruling," said Al Abdul Hadi.

On the other hand, many were critical of the order. "This court order," Kuwaiti economic researcher Amr Al Tamimi said, "contradicts with the principles of free economy".

"Had the indicators [benchmark] been moving up, would the dealers go to court?" Al Tamimi asked in an interview with Gulf News.

"The danger of this ruling lies in the possibility of it being repeated in the future," added the former head of Kuwaiti Econ-omists Association.

Many Kuwaiti MPs warned that the move "signalled a lack of confidence and would further drive the index down once trading resumed, wondering who would bear the consequences of such action".

"There is a decision to present an appeal ... trading could be resumed on Sunday or Monday if the appeal is accepted," Kuwaiti Commerce Minister Ahmad Baqer was quoted as saying by an agency.

"I think it was a wrong and dangerous decision," eminent Kuwaiti econ-omist Jasem Al Saddoun said.

"It is dangerous because it creates a state of panic," he said. "It is also dangerous because a big share of the solution depends on the availability of prices," which will not be available after halting trading.

Explaining to Gulf News, Al Saddoun noted the court seemed not to take into consideration several elements before issuing its precedent-setting order.

The ruling judge, "with all respect to his ruling", should have consulted experts on the issue and its financial, economic and psychological implications of the order.

The ruling was not consistent with the exceptions given to the "Bourse Committee" prior to halting trading. They include cases of emergency as in cases of war, natural disasters, major security problem or technical failure, he added.

"The judiciary took a decision against the [wish] of the Bourse Committee," Al Saddoun added.

The committee is headed by the Minister of Commerce and comprises of several figures either because of their personal capacity or professional careers, including representatives of Central Bank, Bourse, traders and brokers.

"The judiciary has no right to deprive people from buying at a low price because X or Y sold at a low price," Al Saddoun, who heads Al Shal Centre for Economic Research and Consultancy, said.

"There are people who want to sell even at a low price because they need the cash.... to stop them from exercising their rights is a grave mistake."

Since June 24, Kuwaiti stock market hit an all-time peak of 15,654, and then lost more than 43 per cent.

- With additional input from agencies

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