Two ‘Forbidden’ IPOs Pit Gulf Investors Against Islamic Clerics - Bloomberg

Two ‘Forbidden’ IPOs Pit Gulf Investors Against Islamic Clerics - Bloomberg:

This year’s list of IPO debacles could grow longer if Kuwait’s clerics have their way.

A religious ruling in Kuwait against two initial public offerings launched this month is stirring fears that the Gulf state is clamming up at a time its bigger neighbor Saudi Arabia is doing just the opposite, courting investors in anticipation of Saudi Aramco’s IPO.

The offering of half of Kuwait’s stock exchange to citizens and a long-awaited public subscription to Shamal Al-Zour, the company that owns and operates a major power station, began Oct. 1. Nearly three weeks later, Kuwait’s highest religious authority said they breached Islamic law’s prohibition on interest and branded them “haram,” or forbidden.

The non-binding fatwa issued by the Ministry of Awqaf and Islamic Affairs said Boursa Kuwait trades in stocks of companies including those that don’t comply with Islamic principals, and makes “illegal revenues” from brokering transactions in these stocks. It also states Kuwait Stock Exchange company’s earns returns on deposits at banks aren’t Shariah compliant.