GCC equities flat despite oil boom in September


KUWAIT: Kuwait Financial Centre “Markaz” recently released its Monthly Markets Review report. Markaz report stated that Kuwait stock market continues to hog the limelight, as investors are upbeat on its inclusion in FTSE emerging market index, which officially took effect from September 24. There was a liquidity spike in the market on September 20. However, Kuwait stock market was flat during the month and is just about holding on to its yearly gain of 8.8 percent. Kuwait’s All Share Index, despite its inclusion into the FTSE Emerging Market index fell by 0.83 percent during the month as the effect of FTSE inclusion was already factored in by investors during the build-up. Among Kuwait’s blue-chip companies, Boubyan Bank was the biggest gainer, up by 6.8 percent during the month, while Zain underperformed, with its share price reducing by 0.2 percent.

The S&P GCC index was up 0.2 percent for the month, increasing the overall gains for the year to 9.8 percent. The rebound in Saudi and Dubai markets at the end of the month helped the S&P GCC index close on a positive note for September. Oman and Saudi Arabia’s indices were the best performers of the month rising by 2.8 percent and 0.65 percent, respectively. Abu Dhabi was the worst performer, falling by 1.0 percent. The downgrade in credit ratings of two Dubai based state owned companies by S&P Global in addition to the sluggish real estate sector weighed down on Dubai’s equity markets raising its losses before staging a recovery at the end of the month. However, it remains the worst performer during the year, extending its losses to 15.9 percent. Qatar remained the best performing GCC equity market in YTD 2018 despite seeing its General Index falling by 0.7 percent during September.

Markaz report stated that Abu Dhabi Commercial bank and Boubyan Bank were the top performers among GCC blue chip companies, rising by, rising by 12.8 percent and 6.8 percent during the month respectively. Announcement regarding a three-way merger involving Abu Dhabi Commercial Bank to form the fifth largest bank in the GCC enthused investor sentiments, causing the company’s stock to rise and stand out among UAE blue chip companies who posted negative returns for the month of September. Saudi based utility company Saudi Electric was the worst performer among blue chip companies, with its stock falling by 11.3 percent during the month, extending its YTD losses to 23.9 percent.
Brent crude is now trading at $82.7/bbl, and is up 23.7 percent for the year. Supply concerns due to US sanctions on Iran and the increase in demand for oil have been major factors that have pushed up the global oil prices. Strong oil price should provide the needed fiscal relief for GCC countries though many countries still have break-even oil price above the current spot price.

Market trends
Abu Dhabi Commercial Bank (ADCB) is exploring the possibility of a merger with its local counterparts Union National Bank (UNB) and the sharia-compliant lender Al-Hilal Bank. Spicing up the M&A environment is a rumour of possible merger of two of the biggest GCC airlines i.e, Emirates and Etihad. However, there is no confirmation of this deal yet from either of them.

Meanwhile, Tit-for-tat imposition of tariffs continues between US and China with the former slapping tariffs on $200 billion worth of Chinese exports into US while China retaliated with tariffs on about $60 billion of exports into China by US. Negotiations are ineffective so far and analysts are hoping that post US mid-term elections the posturing can get mellowed. At the moment, China, along with other emerging markets, is feeling the heat with Shanghai index down 14.7 percent for the year and emerging market index down by 9.5 percent while S&P 500 is up 9 percent for the year. Imposing tariffs in a globalized world is a retrograde step and will only lead to lower global economic growth.

Markaz monthly market review

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