Kuwait’s ranking up in Corruption Perception Index
Saudi stock market top performer in January
Corruption Perception Index 2018
In 2018, Kuwait achieved position No. 78 out of 180 states on the Corruption Perceptions Index and scored 41 out of 100, upon which the countries are ranked system compared to position 85 scoring 39 points in 2017. This position was the lowest in 15 years during which it was included in the Index. The improvement in its position, and two percentage and with two points percent appreciated, it is a commendable improvement for everyone involved, thus should be encouraged and supported so that it may become a sustainable progress with higher points in the future, says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.
However, although the progress is positive it is not enough because it is neither the first nor the biggest progress in one year. Kuwait advanced 14 positions in one year from position 69 in 2014 to position 55 in 2015, and these two positions are better than its current position. Loose systems and laws caused Kuwait’s lagging 20 positions in one year after 2015 and occupied position 75 in 2016 with 41 points. The decline continued to position 85 in 2017. Kuwait is still very lagging in two other indexes; the first being on the GCC level where it held the fifth position, and on the Arab level where it held the 8th position is that it came fifth on the GCC level and 8th on the Arab level, which is lagging position in the absolute. It is also lagging in itself if it is compared with the number and size of anti corruption authorities and inspection systems in Kuwait compared with others. The second index is its scoring of 41 points out of 100 points, which is below the average (43 points) achieved by 180 states, however it ranked among the first half of the total number of those states.
If we adopt the year 2018 as the base year, it does not seem a year worthy of progress. During it, two scandals, emerged which were considered highly severe after the Deputies’ Deposit Scandal.
The first one occurred in the Ministry of Interior which is in charge of the internal security and execution of judgments on debtors. The scandal erupted as a result of exposed embezzlements, which lacked the minimum level of intelligence and hedging, thus indicating a high level of disregard to the laws and values. Defendants admitted their embezzlements and returned a portion of the stolen amount. Nevertheless, this did not prevent them from appearing in official occasions and with official invitations. This represents an additional scandal regarding principal values. The second scandal is stealing files from the headquarters of the judicial authority, which is the last resort of security network in any society. Its fortification and respect is everyone’s obligation.
To sum up, any progress is an appreciated and commendable act. However, this progress should not be circumstantial as per what happened in 2015, but a sustainable one which may not occur except by two conditions. The first is that the society should start with prosecute the top corruptor, because this will promote confidence and support within the society as it represents the absolute pair beholds that cruelty in chasing judgment in accounting every corruptor responsible. The second is the soundness of principal values, i.e. corruptors should not lead investigation and protection of public funds committees, neither should a corruptor be appointed an advisor, nor be invited to public occasions.
Trading Features at Boursa
Kuwait – January 2019
Kuwait Clearing Company (KCC) issued its report regarding “Trading Volume According to Nationality and Category” for the month of January as published on the official website of Boursa Kuwait. The report indicated that individuals still form the largest trading category despite the drop in their share. They captured 50.7% of total value of sold shares (47.3% for January 2018) and 39.5% of total value of purchased shares (47.4% for January 2018). Individual traders sold shares amounting KD 319.229 million and purchased shares worth KD 248.462 million making them the most sector with a net sold trading value of KD 70.767 million.
The second largest contributor to the market’s liquidity is the institutions and companies sector which captured 29.3% of total value of purchased shares (23.5% January 2018) and 17.7% of total value of sold shares (21.7% January 2018), making
them the closest competitor to the individual traders, with increasing contribution to the market. This sector purchased shares worth KD 184.129 million and sold shares worth KD 111.189 million, making them the only sector with a net purchased trading value of KD 72.940 million.
The third contributor to market liquidity is the clients’ accounts (portfolios) sector which captured 24.6% of total value of sold shares (21.2% January 2018) and 24.4% of total value of purchased shares (19.6% January 2018). This sector sold shares worth KD 155.056 million and purchased shares worth KD 153.627 million, with a net sold trading value of KD 1.429 million.
The last contributor to liquidity is the investment funds sector which captured 6.9% of total value of sold shares (9.7% January 2018) and 6.8% of total value of purchased shares (9.6% January 2018). This sector sold shares worth KD 43.596 million and purchased shares worth KD 42.851 million, with a net sold trading of KD 745 thousand.
Boursa Kuwait still continues to be a domestic Boursa with higher share for Kuwaiti traders as they are the biggest trading group. They sold shares worth KD 559.808 million, capturing 89% of total sold shares (85.5% January 2018), and purchased shares worth KD 507.126 million capturing 80.6% of total value of purchased shares (84.9% January 2018). Becoming the only selling with a net trading value of KD 52.683 million. This indicates a continuous trend for the local investors to drop their investments in the domestic Boursa.
Percentage share of other investors out of the total purchased shares value, scored 13.9% (9.5% January 2018), and purchased shares worth KD 87.131 million and sold shares worth KD 38.687 million, 6.1% of total sold shares (8.3% January 2018); thus making their trading value the most with a net purchased of KD 48.444 million. This means that the foreigner investor’s confidence in the domestic Boursa is increasing and the appetite of the investors from outside the Gulf region has grown to invest more in the local Boursa, especially after the latest Boursa promotion as well as the listing of some of its companies in foreign indexes. GCC Investors’ share out of total value of purchased shares scored 5.5% (5.6% January 2018) worth KD 34.812 million, while value of sold shares scored 4.9% (6.1% January 2018) worth KD 30.573 million, with the net purchased trading value of KD 4.239 million. The relative distribution among nationalities differed slightly from its predecessor. Kuwaitis occupied 84.8%, other nationalities occupied 10% and GCC traders’ share captured 5.2%, versus 85.2%, 8.9% and 5.9% for Kuwaitis, other nationalities and GCC traders respectively, for the same period of 2018. This means Boursa Kuwait remained domestic with most shares allocated to the local investor but their contribution is heading to a decrease. The non-Kuwaiti investors from outside the GCC outweighed that from within the GCC states, with the dominance of trading for individuals
Number of active accounts between the end of December 2018 and the end of January 2019 dropped by -3.6%, compared with a decrease by -5.2% between the end of December 2017 and the end of January 2018. Number of active accounts in the end of January 2019 scored 14,028 accounts or 3.62% of total accounts versus 14,558 accounts in the end of December 2018, 3.76% of total accounts for the same month.
Comparative Performance of Selected Stock Market – January 2019
The performance of markets was positive with the beginning of the New Year. 13 markets (out of 14) achieved gains, with being some quite substantial for a month, while one market achieved losses. Alternatively, one month is not fit as an index for a general trend, however, the sustained positive performance in the markets with high gains in 2018 (like the Qatari and Abu Dhabi markets) and the fact that the market with the highest losses back in 2018, (the Dubai market) reversed its direction to achieve gains in January, proves to be a positive indicator.
The biggest gainer in January was the Saudi market whose index gained 9.4% after it ended 2018 as the 4th biggest gainer by 8.3% gain. This helps it reinforce its gains in 14 months (December 2017 - January 2019) to about 18.5%. The second biggest gainer was the American market whose index added 7.2% gains in one month to begin a compensation phase after a weak performance in 2018 during which it achieved -5.6% losses. The German and French markets came next in gains by adding 5.8% and 5.5% respectively. However, the gains for the preceding two markets could not compensate the losses in the last 14 months, where in the German market registered -13.5% and the French -6%.
The only loser in January was Muscat stock market which registered a loss of -2.5% continuing its losses in 2018 which were about -15.2%. Thus its losses rose to -17.3%, during the 14 months. As such, January achieves an irony when a Gulf market leads in gains as well as training in its ranking. We still hold our former point of view. The dangers embedded in macro economies, companies’ problems with the high level of debts coinciding with the high interest rate on the US$ are factors pressing on the stock markets’ performance. Therefore, we expect regression in February that ends with dominance of negative performance unless the indexes of macro economy and politics become better.
Kuwait International Bank (KIB)
Financial Results 2018
Kuwait International Bank (KIB) announced results of its operations for 2018, which indicate that the bank’s net profits (after tax deductions) scored about KD 21 million, increasing by KD 3.2 million or by 18.2% compared with KD 17.8 million for 2017. This rise in net profits is due to the decline in total provisions by KD 4.11 million, compensating the decrease in operating profit by KD 727 thousand. The following graph displays development in profit level relevant to the bank shareholders during the period (2008-2018):
In details, total operating income increased by KD 2.38 million or by 3.7%, and scored KD 66.63 million compared with KD 64.25 million for 2017. This was caused by the rise in the item of net financing income by KD 4.61 million or by 9.4%, reaching KD 53.66 million versus KD 49.05 million. While the item of investment income dropped by KD 2.9 million and scored KD 1.6 million compared with KD 4.5 million in 2017.
On the other hand, operating expenses rose by a higher value than the rise in total operating income, i.e. by KD 3.1 million or by 9.5% scoring KD 35.9 million compared with KD 32.8 million, as a result of the rise in all items of operating expenses. Percentage of total operating expenses to total operating income scored 53.9% versus 51% in 2017. Item of provisions and impairment losses dropped by KD 4.11 million or by 33.3%, and scored KD 8.24 million compared with KD 12.35 million. Therefore, the net profit margin increased to 31.6% compared with 27.7% in 2017.
The bank’s financial statements indicate that the bank’s total assets rose by KD 252.6 million or by 13.2%, and scored KD 2.169 billion versus KD 1.916 billion in the end of 2017. Item of financing receivables rose by KD 301.4 million or by 23.1%, and scored KD 1.606 billion (83.8% of total assets) versus KD 1.304 billion (68.1% of total assets). Percentage of total financing receivables to total deposits scored 87.5% compared with 81.6%. Also, item of cash and balances with banks rose by KD 22.1 million or by 113.8%, and scored KD 41.6 million (2.2% of total assets) versus KD 19.5 million (1% of total assets) in the end of 2017. While item of due from banks dropped by KD 87.2 million or by 21.7%, scoring KD 315.7 million (16.5% of total assets) versus KD 402.9 million (21% of total assets).
Figures indicate that the bank’s liabilities (excluding total equity) increased by KD 239.8 million or by 14.5%, and scored KD 1.892 billion versus KD 1.652 billion in the end of 2017. Percentage of total liabilities to total assets scored 87.2% compared with 86.2% in 2017.
Analysis of the bank’s financial statements indicates that all bank profitability indexes increased compared with the end of 2017. Average return on equities relevant to the bank’s shareholders (ROE) rose to 7.8% from 6.9%. The average return on the bank’s assets (ROA) increased to 1.03% compared with 0.95%. Likewise, the average return on the bank’s capital (ROC) increased to 20.3% versus 17.2%. Earnings per share (EPS) increased to 22.38 Fils compared with 18.96 fils. (P/E) scored 11.8 times compared with 12.0 times (improved), due to the rise in the EPS by 18% against a lower rise in the share market price by 15.8%. (P/B) scored 1.0 times versus 0.9 times in 2017. The bank announced its intention to distribute cash dividends by 11% of the nominal share value and 4% bonus shares, which is equivalent to 11 fils per share. This means the share achieved 4.2% dividend yield on the closing price in the end of 2018 at 264 fils. Cash dividends scored 10 fils per share in 2017, this indicates that the bank has increased its distributions of cash alongside the distributions of bonus shares.
The Weekly Performance of
Boursa Kuwait
The performance of Boursa Kuwait for last week was less active compared to the previous one, where the traded value, traded volume, number of transactions and the general index (Al Shall index) decreased. Al Shall Index (value weighted) closed at 435.5 points at the closing of last Thursday, showing a decrease by 2.4 points or by 0.5% compared with its level last week. While it increased by 6.5 points or by 1.5% compared with the end of 2018.