Markaz: S&P Pan Arab in­dex ended at 0.6%

Kuwait Times - - BUSINESS -

Kuwait Fi­nan­cial Cen­tre “Markaz” re­cently re­leased its Monthly Mar­ket Re­search re­port. In this re­port, Markaz ex­am­ines and an­a­lyzes the per­for­mance of eq­uity mar­kets in the MENA re­gion as well as the global eq­uity mar­kets for the month of June 2017. The re­port stated that the per­for­mance of MENA mar­kets were mixed in the month of June. S&P Pan Arab in­dex ended flat at 0.6% dragged lower by Qatar while sup­ported by the rise in the Saudi stocks. Saudi Ara­bia’s Tadawul in­dex soared 8.1% in June af­ter the an­nounce­ment from MSCI on its pos­si­ble in­clu­sion in the emerg­ing mar­kets in­dex by the mid of 2019. Egypt and Dubai bourses gained 1.7% and 1.8% re­spec­tively.

Dubai’s in­dex ben­e­fit­ted from the gains in Emaar prop­er­ties af­ter the com­pany an­nounced its plans to sell of 30% of its real es­tate busi­ness in the mar­ket. Jolted by the geopo­lit­i­cal cri­sis, Qatar’s main in­dex shed 8.1% in the month of June mak­ing it the worst per­form­ing in­dex across the MENA re­gion. The in­dex plum­meted by 13.5% YTD, as an es­ti­mated USD 35 bn has been pulled out of Qatar stock mar­ket mainly by the GCC in­vestors. Oman’s Mus­cat all share in­dex was an­other poor per­former from the MENA re­gion. The in­dex lost 5.6% in the month of June, as in­vestors were wor­ried on the damp­ened eco­nomic growth prospects. Weak sen­ti­ments be­cause of fall­ing oil prices weighed on Kuwait weighted and price in­dex that fell by 1.3% and 0.3% re­spec­tively.

Value traded in June re­flected the poor sen­ti­ments in the mar­ket, with vol­ume traded in­creas­ing by 9% while the turnover in the mar­ket de­clined by 13%. All MENA mar­kets, bar­ring Abu Dhabi and Dubai, wit­nessed fall in liq­uid­ity. Bahrain and Kuwait bourses ev­i­denced 45.6% and 31.7% de­cline in value traded. Liq­uid­ity de­clines are com­mon in the MENA bourses, es­pe­cially due to poor trad­ing ac­tiv­ity in the month of Ra­madan. In terms of val­u­a­tion, P/E of Morocco (19.6x), Saudi Ara­bia (15.1x), and Kuwait (13.9x) in­dices were at pre­mium, while the mar­kets of Dubai and Bahrain trad­ing at 9.5x and 9.3x were rel­a­tively cheap among MENA mar­kets.

Per­for­mance of blue chips was mixed in June. Saudi Ara­bian blue chips wit­nessed stel­lar per­for­mance in the month of June. NCB (26.7%), Saudi Elec­tric Com­pany (12.1%) and STC (12%) were the top per­form­ers. Sur­pris­ingly, Ez­dan hold­ing from Qatar was among the top per­form­ers in June gain­ing 15.2% with spec­u­la­tive trad­ing about the buy­out of shares at mar­ket prices pushed the prices up­ward. Qatari stocks were among the worst per­form­ing blue chips in GCC. QNB, Ooreedo and Mas­raf Al Rayan share prices plunged by 32.8%, 18.7% and 10.8% re­spec­tively.

Qatar cri­sis caus­ing a GCC cri­sis

On June 05, Saudi Ara­bia, Egypt, the United Arab Emi­rates (UAE) and Bahrain sev­ered ties with Doha, ac­cus­ing the Qatari gov­ern­ment of pro­mot­ing in­sta­bil­ity in the re­gion. The four Arab coun­tries an­nounced that they would close air and sea trans­port con­nec­tions with Qatar, which is the world’s top ex­porter of liq­ue­fied nat­u­ral gas (LNG). Also, the three GCC coun­tries-KSA, UAE and Bahrain-have blocked their na­tion­als from trav­el­ling to Qatar, while giv­ing Qataris two weeks to leave their na­tions. Kuwait’s me­di­a­tion ef­forts would play a cru­cial role in bring­ing the con­cerned na­tions to the ta­ble and re­solve the is­sues by de­vis­ing a win­win strat­egy for the con­flict­ing par­ties and the Mid­dle East.

Oil Mar­ket Re­view

IPE Brent crude tum­bled 15.7% from the start of 2017 mak­ing it the worst per­form­ing first half for oil af­ter 1998. IPE Brent fell by 4.8% in June as Libya and Nige­ria con­tin­ued to pump in more oil into the mar­ket. In­ven­tory lev­els in the Asian mar­kets, es­pe­cially Malaysia and Sin­ga­pore have spiked to all time high in 2017. Sup­ply has also been on the rise from non-OPEC pro­duc­ers such as the U.S, Canada and Brazil adding to the sup­ply glut.

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