'The KSE has been up and down in recent months, although this month it has done quite well,' says Shailesh Dash, head of research at the local Global Investment House. Political turmoil typically sends countries' stock markets tumbling but surprisingly the KSE rallied in the two weeks following the 21 May decision by Emir Sheikh Sabah al-Ahmed al-Sabah to dissolve the National Assembly (parliament) over an electoral boundary dispute. However, the bourse lost ground again in the week to 15 June.

The good news for investors is that average price/earnings (PE) ratios have fallen to the nine-10 range a level considered cheap-to-fair even by international standards. 'The large caps in general are looking good in particular the banks, which have been benefiting from higher interest rates,' says Dash. The Central Bank of Kuwait raised the discount rate to 6 per cent in November. In Kuwait's case, there is minimal concern about the effects of the recent stock market reversals on banks' asset quality, since they are barred from lending to fund stock market activity.

Banks may be safe, but one of the weaknesses often expressed about the KSE is the extent of cross-shareholding between listed companies and thus the web of interdependence on each other's share price for profits. Six-month results will make interesting reading. In the meantime, turnover is subdued. 'The market is in summertime mode,' says Dash. 'I don't think the correction is over yet, and you are likely to see a few more months of volatility. But things should pick up around the end of the year.'

Some stocks have managed to attract the attention of lacklustre investors through market-moving announcements. KGL Ports International, part of Kuwait & Gulf Link Transport Company, is to lead a consortium which will build and operate a $1,000 million container port at Damietta in Egypt. Investment Dar announced plans to invest hundreds of millions of dollars in infrastructure in Bahrain while Commercial Bank of Kuwait issued a statement in mid-June confirming that it had acquired a sizeable stake in Bank of Bahrain & Kuwait. Global's shares themselves look a good bet as the firm increasingly spreads its international wings, most recently with the acquisition of a 43 per cent stake in Pakistan's second largest investment bank, JS Capital Markets.