March performance was negative for markets due to Corona impact

Crude oil production 2.8 million barrels per day

Oil and Public Finance – March 2020

The current fiscal year 2019/2020 has ended. As a reminder, expenditure allocations in the budget were estimated at KD 22.5 billion and total revenues estimates were at KD 15.812 billion with KD 13.863 billion as oil and gas revenues (87.7% of total revenues). Oil revenues were estimated based on the following assumptions: crude oil production quota at about 2.8 million barrels per day, estimated price of US$ 55 per barrel, approved exchange rate at 302 fils per US$, gas revenues of about KD 259.4 million, and deducting production cost of about KD 3.418 billion. Non-oil revenues were estimated at KD 1.948 billion. Therefore, the hypothetical deficit anticipated for the budget scored about KD 6.688 billion without deducting the 10% from total revenues to the future generations reserve. However, what matters is the actual results in the final account, says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.

The average price for Kuwaiti oil for the fiscal year 2019/2020, from April 2019 to March 2020 scored US$ 61.6 per barrel, which is US$ 6.6 per barrel or 12.1% higher than the hypothetical budget price at US$ 55 per barrel. The average oil price for fiscal year 2018/2019 scored US$ 68.5 per barrel. This means that the average price for the Kuwaiti oil in fiscal year 2019/2020 is lower by 10% than the average price for fiscal year 2018/2019.

Kuwait is supposed to have achieved actual oil revenues for fiscal year 2019/2020 about KD 15.194 billion, which is higher by 9.6% than value of estimated budget revenues (about KD 13.863 billion). Adding KD 1.948 billion in non-oil revenues, anticipated total revenues will score KD 17.142 billion for the entire fiscal year.

If that is achieved, and assuming spending all estimated expenditures in the budget in the amount of KD 22.5 billion, without deducting what is to be transferred to the future generations reserve as it is meaningless in case if a deficit is funded by the general reserve or by borrowing against the future generations reserve, the budget would score an actual deficit of KD 5.4 billion for the fiscal year 2019/2020.

Trading Features at Boursa

Kuwait – March 2020

Kuwait Clearing Company (KCC) issued its report regarding “Trading Volume According to Nationality and Category” for the period of 01/01/2020 to 31/03/2020, as published on the official website of Boursa Kuwait. The report indicated that individuals still form the largest trading category, where their total purchased shares increased and their sold shares decreased. They captured 38.2% of total value of purchased shares (37.4% First Quarter 2019) and 36.7% of total value of sold shares (44.8% First Quarter 2019). Individual traders purchased shares amounting KD 910.156 million and sold shares worth KD 874.319 million, with a net of purchasing trading value of KD 35.837 million The second largest contributor to the market’s liquidity is the institutions and companies sector which captured 30.8% of total value of purchased shares (34.5% for the same period of 2019) and 28.4% of total value of sold shares (22.2% for the same period of 2019). This sector purchased shares worth KD 733.730 million and sold shares worth KD 676.509 million, making it the most sector with a net purchased trading value of KD 57.221 million.

The third contributor to market liquidity is the clients’ accounts (portfolios) sector which captured 26.4% of total value of purchased shares (21.9% for the same period of 2019) and 26.4% of total value of sold shares (25.2% for the same period of 2019). This sector purchased shares worth KD 628.839 million and sold shares worth KD 628.780 million, with a net purchased trading value of KD 50.4 thousand.

The last contributor to liquidity is the investment funds sector which captured 8.5% of total value of sold shares (6.2% for the same period of 2019) and 4.6% of total value of purchased shares (7.9% for the same period of 2019). his sector sold shares worth KD 202.490 million and purchased shares worth KD 109.373 million, with an only net sold trading value of KD 93.116 million.

Boursa Kuwait still continues to be a domestic Boursa with higher share for Kuwaiti traders as represent by the biggest trading group. They purchased shares worth KD 1.814 billion, capturing 76.1% of total purchased shares (73% for the same period of 2019), and sold shares worth KD 1.793 billion capturing 75.3% of total value of sold shares (83.6% for the same period of 2019), becoming the most group with a net purchased trading value of KD 20.297 million.

Percentage share of other investors out of total sold shares value scored 19.8% (11.4% for the same period of 2019), and sold shares worth KD 470.470 million and purchased shares worth KD 433.012 million, 18.2% of total sold shares (22.3% for the same period of 2019); thus making their trading value the only with a net sold of KD 37.457 million. This means that the other foreign investors’ confidence in the Boursa Kuwait is becoming lower due to the current world crisis.

GCC Investors’ share out of total value of purchased shares scored 5.7% (4.6% for the same period of 2019) worth KD 135.415 million, while value of sold shares scored 5% (5% for the same period of 2019) worth KD 118.254 million, with a net purchased trading value of KD 17.161 million.

The relative distribution among nationalities differed slightly from its predecessor. Kuwaitis occupied 75.7%, other nationalities occupied 19% and GCC traders’ share captured 5.3%, versus 78.3%, 16.9% and 4.8% for Kuwaitis, other nationalities and GCC traders respectively, for the same period of 2019. This means Boursa Kuwait remained domestic with most shares allocated to the local investor and their share is decreasing. 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 2019 and the end of March 2020 declined by -1.5%, compared with a greater decrease by -3% between the end of December 2018 and the end of March 2019. Number of active accounts in the end of March 2020 was at 16,934 accounts or 4.27% of total accounts versus 17,203 accounts in the end of February 2020 and 4.34% of total accounts for the same month, dropping by -1.6% during March 2020. Comparative Performance of Selected Financial Markets –

March 2020

March performance was negative for all markets as expected due to the Corona epidemic impact. The 14 markets of the sample achieved varying losses, some of which were historical losses compared with the end of February 2020 performance and compared also with the end of 2019 performance. All market losses compared to the end of February and the end of last year were two digits except for the Chinese market which had losses within one digit, which means it was the least losing market as

China has come a long way in its attempt to contain the Corona pandemic.

The biggest loser in March and the biggest loser since the beginning of the year was the Dubai stock market whose index lost -31.6% and lost about -35.9% compared with the end of the last year. Abu Dhabi market came next by -23.8% losses in one month and -26.4% losses compared with the end of the previous year. The Indian market came third by -23.1% losses, followed by Boursa Kuwait, Bahraini and French markets by -20.6%, -18.7% and -17.2% respectively. The Chinese market achieved the lowest losses in March and during the current year as we mentioned, as it lost about -4.5% in one month and about -9.8% during the 1st Q of 2020.

In general, variables are connected with the Corona pandemic repercussions which are unknown until now.

What happened in March is an indication of the severity of that effect. We believe that all markets will keep their doors open to all probabilities, including more losses, unless firm estimates indicate the timing of the Corona virus elimination. Certainly, uncertainty surrounds the fight against the Corona virus and has a significant influence on the markets and the dealers’ confidence. It is likely that markets might witness more losses until optimism is restored and stocks begin to rise.

The Weekly Performance of

Boursa Kuwait

The performance of Boursa Kuwait for last week was mixed, where the traded value, traded volume and the number of transactions increased, while the general index (Al-Shall Index) decreased. Al-Shall Index (value weighted) closed at 392 points as of last Thursday, showing a decrease by 9.9 points or by 2.5% compared with its level last week. It remained lower by 161.2 points or by 29.1% compared with the end of 2019.