Kuwait trade surplus touches KD 1.693bn in Q4 2016

The Quarterly Statistical Bulletin (October - December 2016) issued by the Central Bank of Kuwait (CBK) and published on its website, provides some economic and monetary indicators that are worth following-up. We will mention some of those indicators for the purpose of documenting their development. An example is the balance of trade (commodity exports minus commodity imports) which achieved a surplus in the 4th Quarter of 2016 by KD 1.693 billion as Kuwait’s exports during this quarter scored KD 4.118 billion, of which 90.4 percent were oil exports. Total commodity exports for the entire year of 2016 scored about KD 13.977 billion, of which 89.6 percent were oil exports. Commodity imports excluding military- during the 4th Quarter of 2016 were at KD 2.424 billion. And the value of commodity imports excluding military- for the entire year of 2016 scored KD 9.315 billion. Balance of trade achieved a surplus in the 1st Quarter of 2016 at KD 391 million, and increased in the 2nd quarter to KD 1.195 billion, and continued increasing to KD 1.383 billion in the 3rd Quarter. Overall, the balance of trade achieved a surplus at KD 4.662 billion in the year 2016 which is less by 33 percent than KD 6.964 billion achieved in 2015.

Consumer prices index in 2016 achieved a positive growth by 3.2 percent as its average was 141.7 (in 2007=100), up from 137.3 in 2015, which comes within the reasonable limits. This growth is due to the dominating effect of housing services prices from 141.2 in 2015, to 150.8 in 2016 (+6.8 percent). The bulletin indicates a continuous increase in the weighted interest rates of balances on deposits from 1.641 percent in the 3rd Quarter to 1.643 percent in the 4th quarter, (a quarterly growth rate by 0.1 percent). Likewise, it increased from 1.498 percent in 2015 to 1.624 percent in 2016, (a yearly increase by 8.4 percent). The weighted interest rates of balances on loans increased from 4.466 percent to 4.509 percent, (a quarterly growth rate by 1 percent). Likewise, it increased from 4.372 percent in 2015 to 4.477 percent in 2016, (a yearly increase by 2.4 percent).

Private sector deposits volume at local banks scored KD 33.966 billion, up from KD 33.044 billion at the end of 2015, (an increase of 2.8 percent). Finally, local banks’ claims on the private sector went up to KD 36.201 billion, from KD 35.302 billion in 2015, (an increase of 2.5 percent).

The financial deficit - The Venezuelan case

We received more than one comment on a paragraph in our last week report about the truth and risks of financial deficit. Some of the comments inquire about whether there will be real risks for cases as a result of delayed advanced remedy of the likely financial deficit. Although there is more than one example like Nigeria and other states in the region, though with different conditions, the Venezuelan case remains an advanced ill case although it owns the largest oil reserves in the world and is rich with other resources and topography.

In its latest reports about Venezuela, the IMF displays some probable indices of its economic performance. Negative performance is a sustained case at -10 percent in 2016, -4.5 percent in 2017, -3 percent in 2018, and 1 percent in 2019. This is associated with two other more serious indices which were the main reason underlying the failure of most states. The first one is the rise of unemployment rate from 18.1 percent in 2016 to 26.9 percent in 2019, and then to 29.8 percent in 2021. The second index which is associated with great deterioration in the income of those still working was the inflation coupled with deteriorated exchange rate of the currency which leads to diminishing the real income. It scored 720 percent in 2016 and soared to 2600 percent in 2019 and to 4600 percent in 2021.

Venezuela is an advanced case of catching the Dutch disease. It used oil funds to buy political loyalties. It made people, or most people, hypnotized or happy in the short term but most of them are now paying the cost through their unemployment and by being unable to obtain their basic necessities. The threat of becoming a failing state is looming in the horizon. All of the preceding occurred because of the failure in adopting the right advanced decision.

Quite the opposite happened to Norway as it adopted its advanced decision in the right timing. The public finance will continue to achieve surplus by $30 billion per annum for the forthcoming 5 years. The current account also achieves surplus by 7.5 percent of the GDP for the next five years and unemployment rate is below 4 percent in the same period and finally inflation is at an average of 2.5 percent for the same period.

The bottom line is that the harmed from delay in the advanced policies is not the senior officials in the decision-making authority but 99 percent of the common people.

Kuwait’s position now is in the middle between Venezuela and Norway. What we reviewed above is the reality of two states and is not a hypothetical analysis. What can protect Kuwait from drifting or slipping into the case of Venezuela or even some promoting to the Norwegian case is

making the right decision, more importantly is its timing. There is no more time to avoid the slipping and we are left with no option but to immediately adopt the right policies.

Boursa Kuwait report

Kuwait Clearing Company issued its report titled “Trading Volume According to Nationality and Category” from 01/01/2017 to 31/03/2017 published on Boursa Kuwait official website. The report indicated that individuals are still the largest group, their share started to increase and they captured 53.5 percent of total value of purchased shares (42.5 percent for the first quarter 2016) and 53.1 percent of total value of sold shares (46.8 percent for the first quarter 2016). Individual investors purchased shares worth KD 1.451 billion and sold shares worth KD 1.440 billion with a net trading, purchasing, by KD 10.921 million. The second largest contributor to market liquidity is the clients’ accounts (portfolios) which captured 22.5 percent of total value of sold shares (17.1 percent in the same period of 2016) and 21.6 percent of total value of purchased shares (15.6 percent in the same period of 2016). The sector sold shares worth KD 611.718 million and purchased shares worth KD 584.695 million, thus making its net trading, more selling, by KD 27.023 million.

The third contributor, is the corporations and companies sector which captured 18.3 percent of total value of purchased shares (33.4 percent in the same period of 2016) and 17.7 percent of total value of sold shares (26 percent in the same period of 2016). The sector purchased shares worth KD 496.726 million and sold shares worth KD 480.208 million with a net trading, more purchasing, by KD 16.518 million.

The last contributor to liquidity is the investment funds sector which captured 6.7 percent of total value of sold shares (10.1 percent in the same period of 2016) and 6.6 percent of total value of purchased shares (8.5 percent in the same period of 2016). This sector sold shares worth KD 180.689 million and purchased shares worth KD 180.272 million, with a net trading, selling, by KD 416.8 thousand.

Boursa Kuwait continues to be a domestic Boursa with the Kuwaiti investors forming the biggest trading group and sold shares worth KD 2.463 billion capturing 90.8 percent of total value of sold shares (85.4 percent in the same period of 2016) and purchased shares worth KD 2.423 billion, capturing 89.3 percent of total value of purchased shares (86.3 percent in the same period of 2016). Thus, their net trading, the only one selling, scored KD 40.080 million, which is an indicator of a receding confidence of local traders.

Other investors’ share, out of total value of purchased shares, scored 7.7 percent (9.8 percent in the same period of 2016), and purchased shares worth KD 208.500 million, while their value of sold shares worth KD 173.910 million, 6.4 percent of total value of sold shares (11.2 percent in the same period of 2016). As a result, their net trading, more purchasing, scored KD 34.590 million.

Share of GCC investors, out of total value of purchased shares, formed 3 percent (3.9 percent in the same period of 2016), worth KD 81.609 million, while value of sold shares formed 2.8 percent (3.4 percent in the same period of 2016), worth KD 76.118 million, their net trading, purchasing, by about KD 5.490 million.

Relative distribution among nationalities changed from its previous one and became as follows: 90 percent for Kuwaitis, 7 percent for traders from other nationalities, and 2.9 percent for GCC traders vis-a-vis 85.9 percent, 10.5 percent and 3.6 percent for Kuwaitis, other nationalities and GCC traders respectively in the same period of 2016. This means that Boursa Kuwait remained a local one with the rise in the share of its investors from local traders. However, the turnout is still higher from investors mainly outside the GCC region than from the inside of the GCC region in which an overtrading of individuals is a dominant factor.

Number of active accounts between the end of December 2016 and the end of March 2017 rose by 26 percent (compared to a decrease by -5.2 percent between the end of December 2015 and the end of March 2016). Number of active accounts in the end of March 2017 scored 19,652 accounts, 5.2 percent of total accounts, versus 18,416 accounts in the end of February 2017, 4.9 percent of total accounts for the same month, with a rise of 6.7 percent during March 2017.

Comparative performance for selected markets

By the end of March 2017, the first quarter ended and performance during March was mixed. 7 markets out of 14 markets achieved gains and 7 markets achieved losses. We believe that the performance of March was more inclined towards being negative contrary to our expectations.

The number of markets in the negative zone scored 6 up from 3 in February while 8 markets continued to achieve gains vis-a-vis their levels in the end of last year. The biggest gainer in March was the French market which gained 5.4 percent in one month. The German market came next by 4 percent gains in one month. That was achieved despite the likely risks of the elections of the next summer in both countries and despite the beginning of BREXIT negotiations between Britain and the European Union. The third winner in March was the Indian market which gained about 3.1 percent which ranked it in the leading position since the beginning of the year with 11.2 percent gains, if we exclude the gains of Kuwait’s price index which scored 22.3 percent since the beginning of the year.

Bahrain and Boursa Kuwait -weighted index- achieved the second and third better performance since the beginning of the year with 11.1 percent and 8.7 percent gains respectively.

The biggest losers in March were Dubai market which lost about -4.1 percent in March, and Muscat market which lost about -4 percent, and the weighted index for Boursa Kuwait which lost -2.5 percent. The strange and wrong paradox is that the weighted index of Boursa Kuwait, as we stated, was the third biggest loser in March while the price index for the same boursa was the third winner in the same month. The weighted index achieved gains equal to two and half times the gains of the weighted index in the first quarter. The two indices measure the performance of the same boursa and it is impossible for both to be correct.

The summary of the first quarter performance contains indicators to adverse reflection for the oil market conditions and the geopolitical conditions on the majority of the Gulf region markets. The last four positions in the negative zone are occupied by 4 Gulf markets. The Omani market settled at the bottom by losses since the beginning of the year by 4 percent. The Saudi market came next to it by -2.9 percent losses, then Abu Dhabi market by -2.3 percent losses and finally Dubai market by -1.4 percent losses.

The Japanese market and the Qatari markets shared them in the negative zone.

We do not know whether April would continue the sorting process, ie the advanced and emerging markets would continue to score gains while the majority of the Gulf region markets would continue to score losses. It is however more likely to be with fading of the fears from the repercussions of the American presidential elections. That is to the interest of other markets. The debate continues on whether the agreement of oil producers would be extended or not which is harmful to the regional markets.

The weekly performance of Boursa Kuwait

The performance of Boursa Kuwait for last week was more active compared to the previous one, where all indexes showed an increase, the traded value index, the traded volume index, number of transactions index, and general index, AlShall Index (value weighted) closed at 399 points at the closing of last Thursday, showing an increase of about 10.3 points or about 2.6 percent compared with its level last week, and it increased by 36 points or about 9.9 percent compared with the closing at the end of 2016.