Volumes picked up in March and April, from a February low, but values failed to follow suit. The problem was less a decline in the attractiveness of Kuwaiti stocks and more that the bourse was outshone by other investment opportunities. Initial public offerings (IPOs) in the UAE and in the local market stole the show, with the offering of 76 per cent of the shares in the newly formed Bubiyan Bankeagerly awaited and closing in late May more than three times oversubscribed. The bank, backed by the Kuwait Investment Authority, has capital of KD 100 million ($333 million).

However, the market subsequently resumed normal service, with the same factors driving the upward movement as have been for more than a year - high oil prices, high liquidity, strong performances by local listed companies and investor confidence. 'You just need to look at airport traffic figures to get an idea of the buoyant state of the Kuwaiti economy - passenger numbers are up by about 24 per cent and cargo flows have gone up by 44 per cent,' says Shailesh Dash, head of research at the local Global Investment House. 'Government spending is rising all the time on the back of high oil prices, and the only risk to the KSE is that interest rates will go up, which they surely must do at some point soon. But the fundamentals are sound.'

Similar factors are driving soaring stocks across the region. However, some analysts warn that when and if prices turn in the opposite direction, the Kuwait market has furthest to fall. 'Ties between local companies and the KSE are much tighter than elsewhere,' says a London-based analyst. 'Local firms reinvest their profits in the market, and when the market does well, their profits increase. But the circle will not remain virtuous forever.'

Nevertheless, there are profits to be made in the interim. Banking, usually among the strongest performers, did not have a particularly strong May, although Burgan Bank shares were among the most heavily-traded. Building materials firms' stocks, however, continue to rise as the frenetic level of construction activity persists. Gulf CementCompanyposted first quarter profits up by 356 per cent from their 2003 level.

'Looking forward, cement stocks will be a good bet for some time to come,' says Dash. 'And banks are more than capable of coping with the impending entry of competition to the market. Logistics companies are also benefiting from increasing opportunities, at home and abroad.'