GCC trad­ing ac­tiv­ity perks up in July

KAMCO GCC Mar­kets Monthly Re­port

Kuwait Times - - BUSINESS -

Trad­ing ac­tiv­ity in the re­gion im­proved in July 2017 after re­ced­ing by 14 per­cent m-o-m in June-17 due to the lower ac­tiv­ity from traders dur­ing Ra­madan, and lower num­ber of work­ing days due to hol­i­days. Over­all value traded in the GCC was higher by 8.5 per­cent m-o-m and reached $ 21.7 bil­lion. How­ever the MSCI GCC in­dex which gained 4.9 per­cent in Jun-17 dropped the fol­low­ing month, al­beit marginally, driven by the TASI which went down by 4.5 per­cent m-o-m in July-17. All other ma­jor GCC stock mar­kets bar­ring MSM closed the month in the green with DFM lead­ing the way with a 7.1 per­cent m-o-m re­turn, fol­lowed by Qatar (+4.2 per­cent) and Kuwait (Kuwait Weighted In­dex: +3.5 per­cent).

Q2-17 earn­ings sea­son across the GCC is un­der­way, and the TASI in­dex was also af­fected in July-17 by cor­po­rate re­sults, as some large caps saw de­clines in prof­itabil­ity y-o-y. SABIC saw its Q2-17 net profit drop by 25 per­cent, due to higher cost of sales and lower sales vol­umes. Saudi Ara­bia also saw their GDP growth re­duced by the IMF for 2017 and 2018, which in our view would have af­fected sen­ti­ment to­wards fu­ture cor­po­rate prof­itabil­ity as well. Nev­er­the­less, Saudi Ara­bia’s SAR 17 bil­lion sukuk was over­sub­scribed by three times, which un­der­pins the strength of the econ­omy and its cap­i­tal mar­kets. In Kuwait, H1-17 re­sults of the bank­ing sec­tor showed that prof­itabil­ity of banks have grown by over 8 per­cent y-o-y.

Oil prices pulled back 8 per­cent-10 per­cent dur­ing the month of July to hover around $ 50/bbl after vis­it­ing in­tra month lows of mid­for­ties. Sovereign credit rat­ings ac­tion, oil mar­kets and mone­tary pol­icy ac­tion from Cen­tral banks would also have a sig­nal­ing im­pact on cor­po­rate prof­itabil­ity and in turn stock prices in the fol­low­ing quar­ters. More­over, a re­cov­ery from the TASI and QE 20 in­dices in H2-17 would be cru­cial in driv­ing GCC mar­kets and mar­ket ac­tiv­ity higher in terms of vol­umes go­ing forward.

Kuwait

Stocks re­versed trends from June-17 in Kuwait and went up dur­ing July-17 as re­flected in the in­creases recorded by all the three­bench­mark in­dices. Large-caps did bet­ter than small-caps as the Weighted In­dex and Kuwait 15 In­dex out­per­formed the Price in­dex. The Kuwait Price In­dex im­proved by 1.3 per­cent, but traded be­low the crit­i­cal 7,000 mark to reach 6,851.62 points by month end. The Weighted In­dex after breach­ing the 400 mark in Jun-17, went up by 3.5 per­cent and traded above the mark to close at 413.29 points, while the Kuwait 15 In­dex per­formed marginally bet­ter and in­creased by 3.6 per­cent to reach 943.17 points. Nev­er­the­less, de­spite re­main­ing in a trad­ing range, Kuwait con­tin­ues to record the best YTD-17 per­for­mance in the GCC with a re­turn of 19 per­cent for the Price in­dex, 8.7 per­cent for the Weighted In­dex and 6.6 per­cent for the Kuwait 15 In­dex.

Trad­ing ac­tiv­ity on the ex­change jumped with monthly vol­umes up by 148.1 per­cent post Ra­madan and hol­i­days to reach 1.82 bil­lion shares as com­pared to 0.73 bil­lion shares traded dur­ing June-17. The monthly value traded also al­most dou­bled to reach KD 300 mil­lion as com­pared to KD 150 mil­lion dur­ing the pre­vi­ous month.

Num­ber of trades also more than dou­bled to reach 67,408 trades in Jul-17as against 32,532 trades in Jun-17. The monthly vol­ume chart was topped by Alim­tiaz In­vest­ment Group, with 219 mil­lion shares traded dur­ing the month fol­lowed by Abyaar Real Es­tate Development and AUB at 124 mil­lion and 88 mil­lion traded shares, re­spec­tively. On the monthly value chart, Kuwait Fi­nance House (+10.8 per­cent) topped the list with KD 41.1 mil­lion worth of shares traded dur­ing the month fol­lowed by KD 36.8 mil­lion for Alim­tiaz In­vest­ment (6.3 per­cent) and KD 28.5 mil­lion worth of shares for NBK (-3.3 per­cent).

In terms of sec­tor per­for­mance, the Con­sumer Ser­vices in­dex recorded the high­est monthly re­turn of 5.3 per­cent on the back of 36 per­cent surge in shares of IFA Hotels & Re­sorts, the best per­form­ing stock dur­ing the month. The Oil & Gas and the Bank­ing in­dices recorded pos­i­tive re­turns dur­ing the month. The Oil & Gas in­dex rose by 5 per­cent m-o-m was buoyed by NAPESCO, which went up by 15 per­cent for the month. The gain of 4.8 per­cent for the Bank­ing in­dex pri­mar­ily re­flected 10.8 per­cent re­turns for KFH and was fur­ther so­lid­i­fied by the 3.3 per­cent m-o-m re­turns from NBK.

More­over, quar­terly earn­ings for banks shows pos­i­tive y-o-y growth for the six banks that re­ported Q1-17 earn­ings. KFH re­ported a y-o-y net profit in­crease of 15.2 per­cent in H117, while NBK saw its prof­its move up by 9.3 per­cent y-o-y as com­pared to H1-16. The monthly gain­ers chart also in­cluded Na­tional In­dus­tries Group with a gain of 23.9 per­cent as the. On the de­clin­ers side, the Con­sumer Goods in­dex wit­nessed the steep­est de­cline dur­ing the month recorded at 11.4 per­cent as the largest stock in the in­dex - Kuwait Food dropped by 14 per­cent m-o-m. Shares of First Taka­ful In­sur­ance topped the monthly de­clin­ers list record­ing a fall of 19.3 per­cent fol­lowed by United Pro­jects Group and Au­to­mated Sys­tems Co. with monthly de­clines of 18.0 per­cent and 17.4 per­cent, re­spec­tively. The monthly mar­ket breadth was strongly skewed to­wards gain­ers that in­cluded 88 com­pa­nies while de­clin­ers in­cluded 59 com­pa­nies. Prices of 14 com­pa­nies re­mained un­changed.

Saudi Ara­bia (Tadawul)

The rel­a­tively weak earn­ings sea­son led the TASI to de­cline for the month of July-17, after wit­ness­ing a strong Jun-17 where the in­dex went up by over 8 per­cent m-o-m. The in­dex, which was the only ma­jor mar­ket to see lower lev­els, de­clin­ing by 4.5 per­cent m-o-m in July17, but still traded above the sup­port level of 7,000 points and closed at 7094.2 points. In­dex per­for­mance was mixed and was mostly skewed to­wards losers. Food & Bev­er­ages was the key lag­gard as it plunged by 11.9 per­cent m-o-m. Real Es­tate Mgmt. & Development and En­ergy in­dices fol­lowed with de­clines of 7.7 per­cent m-o-m and 6.9 per­cent m-o-m. Tele­coms (-5.7 per­cent), Util­i­ties (-5.6 per­cent) and Banks (-4.7 per­cent) were also key in­dices which pulled down the over­all in­dex. Amongst the gain­ers was the Me­dia in­dex pre­dom­i­nantly which went up by more than 125 per­cent m-o-m in July-17, as Saudi Research and Mar­ket­ing Group saw its share price end the month up by more 1.5 times. Food & Sta­ples Re­tail­ing and Re­tail also moved by 4.0 per­cent each m-o-m from the month of Jun-17.

In earn­ing re­leases, in­dex bell­wether SABIC re­ported a net profit of SAR 3.71 bil­lion in Q217 as against SAR 4.96 bil­lion in Q2-16, rep­re­sent­ing a drop of 25 per­cent. Net profit was also down se­quen­tially from SAR 5.24 bil­lion recorded in Q1-17. The drop in net profit y-o-y was due to higher cost of sales and lower sales quan­ti­ties. In ad­di­tion to lower sell­ing prices, quan­ti­ties at Hadeed re­sulted in a net loss of SR 483 mil­lion com­pared to net in­come of SR 86 mil­lion for Q2-16. H1-17 net profit was higher by 13.6 per­cent to reach SAR 8.94 bil­lion due to higher av­er­age sell­ing prices. Al Ra­jhi bank re­ported a net profit of SAR 4.40 bil­lion for H1-17 as against SAR 4.07 bil­lion for H1-16, as the in­crease was mainly driven by an in­crease in op­er­at­ing in­come, which in­creased due to higher net spe­cial com­mis­sion in­come by 8.4 per­cent. Loans and ad­vances port­fo­lio in­creased by 3.7 per­cent to SAR 232.8 bil­lion. NCB’s net profit im­proved by 1 per­cent in H117 y-o-y to SAR 5.12 bil­lion from an im­prove­ment in op­er­at­ing ex­penses, partly off­set by lower to­tal op­er­at­ing in­come. Monthly trad­ing ac­tiv­ity im­proved in Jul-17, al­beit marginally fol­low­ing the Ra­madan sea­son and hol­i­days in Jun-17. Monthly vol­ume im­proved by 0.2 per­cent to 2.91 bil­lion shares as com­pared to 2.90 bil­lion shares dur­ing the pre­vi­ous month.

Abu Dhabi Se­cu­ri­ties Ex­change

The ADX fol­lowed broad key GCC mar­ket (ex-TASI) cues and gained by 3.2 per­cent dur­ing the month of July-17. The in­dex closed at 4566.15 points and moved into the green on a YTD ba­sis. Sec­toral per­for­mance in­cluded both gain­ers and losers. Tele­com was the best per­form­ing in­dex as it gained by 8.4 per­cent, as Eti­salat (+ 8.3 per­cent) was able to buoy the in­dex higher. In­vest­ment & Fi­nan­cial Ser­vices com­pa­nies also jumped by 6.3 per­cent m-o-m for the month of July-17, while Banks moved up marginally by 13 per­cent m-o-m. Real Es­tate fol­lowed & Ser­vices fol­lowed with gains of 3.0 per­cent and 1.5 per­cent re­spec­tively from the pre­vi­ous month. In­dices which saw lower lev­els in­cluded the In­dus­tri­als in­dex, which went down by 1.6 per­cent m-o-m, as larger stocks in the in­dex Gulf Pharma (-1.3 per­cent) and RAK Ceramic (-1.2 per­cent) re­ceded for the month of July-17. The Con­sumer Sta­ples and In­sur­ance in­dices also saw lower lev­els as they re­ceded by 1.0 per­cent and 0.5 per­cent re­spec­tively.

In prom­i­nent H1-17 earn­ings re­leases, group net Profit for First Abu Dhabi Bank im­proved 4 per­cent y-o-y to AED 5.49 bil­lion in H1-17. Key driv­ers for the per­for­mance were rev­enues at AED 9.85 bil­lion, and the re­al­iza­tion of sub­stan­tial cost syn­er­gies post-merger; Im­pair­ment charges were 8 per­cent lower y-oy on the back of higher re­cov­er­ies and an ad­e­quately pro­vi­sioned port­fo­lio. ADCB re­ported a net profit of AED 2.114 bil­lion in H1-17 rep­re­sent­ing a de­crease of 2 per­cent y-o-y from H1-17. Though the Bank’s un­der­ly­ing per­for­mance and vol­umes re­mained healthy, net prof­its were im­pacted by ad­verse mar­ket con­di­tions, which re­sulted in higher im­pair­ment charges and a lower non-in­ter­est in­come in Q2-17. In­ter­est in­come for the bank of AED 4.849 bil­lion in H1-17 was 15 per­cent higher yo-y, driven by strong vol­umes as this was achieved in the ab­sence of higher in­ter­est in sus­pense re­ver­sals.

Dubai Fi­nan­cial Mar­ket

DFM was the best per­form­ing in­dex in the GCC for the month of July-17, even as the in­dex was a rel­a­tive un­der­per­former YTD. The in­dex went up by 7.1 per­cent m-o-m and closed at 3633.18 points, which buoyed the in­dex into the green on a YTD ba­sis. Sec­toral trends were mostly pos­i­tive bar­ring the In­dus­tri­als and the Ser­vices in­dices, as each in­dex re­ceded by 1.6 per­cent m-o-m for the month of July-17. The Fi­nan­cials pack con­sist­ing of Banks, Fi­nan­cial and In­vest­ment Ser­vices and In­sur­ance were all up for the month. Fi­nan­cials and In­vest­ment Ser­vices in­dex was the best per­form­ing in­dex as it jumped by 12.8 per­cent m-o-m for the month of July-17, led by 23 per­cent jump in the share price of Shuaa Cap­i­tal and a 13.5 per­cent in­crease in Dubai In­vest­ment’s stock price. Banks went up by 5 per­cent for the month as all banks closed in the green m-o-m. In­sur­ance com­pa­nies also closed up by 5.7 per­cent for the month of July-17. Tele­coms were the sec­ond best per­form­ing in­dex in July-17, gain­ing by 10.1 per­cent m-o-m, as both DU and Hits Tele­com wit­nessed dou­bledigit re­turns for the month.

In earn­ings re­lated an­nounce­ments Emi­rates NBD saw its net profit go up by 5 per­cent to AED 3.9 bil­lion in H1-17. Net in­ter­est in­come im­proved 2 per­cent y-o-y dur­ing the first half of 2017 due to loan growth and helped by a re­cent im­prove­ment in mar­gins. Key driver for the im­prove­ment since the be­gin­ning of the year as loans re­set at higher rates and fund­ing costs im­proved as liq­uid­ity con­di­tions eased. Dubai Is­lamic Bank saw its net profit rise by 7 per­cent YoY to AED 2.143 bil­lion in H1-17.

The QE 20 in­dex re­versed trends from the past four months and was the sec­ond best per­form­ing mar­ket in the GCC for the month of July-17 after the Ra­madan and hol­i­day break. All in­dices were able to close in the green for the month. The in­dex went up by 4.2 per­cent m-o-m, but still closed lower than the 10,000point mark at 9406.06 points. The Qatar All Share in­dex, which maps the broader in­dex, also wit­nessed a move up as it went up by 3.8 per­cent m-o-m for the month of July-17. Banks & Fi­nan­cial Ser­vices com­pa­nies led the way as the heavy­weight in­dex went up by 5.6 per­cent m-o-m, QNB jumped by 8.7 per­cent m-o-m. Mas­raf Al-Rayan and Qatar Is­lamic Bank fol­lowed with gains of 5.8 per­cent and 4.3 per­cent for the month. Tele­coms was the other ma­jor in­dex, which gained and went up by 4.9 per­cent as both Voda­fone Qatar and Oore­doo gained by 8.4 per­cent and 4.2 per­cent re­spec­tively. Real Es­tate in­dex fol­lowed with gains of 3.1 per­cent m-o-m for the month of July-17 as Ez­dan Hold­ing and Barwa were able to push up the in­dex, as the prop­erty stocks went up by 3.7 per­cent each.

The Bahrain All Share In­dex, which re­mains one of the best per­form­ing mar­kets, de­spite de­clin­ing trends from the pre­vi­ous three months gained ground in July-17, al­beit marginally. The in­dex closed 1.4 per­cent higher on a m-o-m ba­sis dur­ing the cur­rent month. The in­dex closed at 1327.81 points at the end of the month. Sec­toral per­for­mance was mixed, as there were in­dices, which gained and re­ceded. Mar­ket breadth for the in­dex fa­vored gain­ers, as 9 stocks gained ground, while 5 stocks wit­nessed de­clines in their share prices. Com­mer­cial Banks were up 1.9 per­cent m-o-m as com­pared to June-17, as Ahli United Bank in­creased by 2.9 per­cent m-o-m. In­dus­tri­als was the best per­form­ing in­dex as the sec­tor gained by 10.4 per­cent m-o-m as com­pared to the pre­vi­ous month. The In­vest­ment sec­tor also gained, al­beit marginally by 0.3 per­cent for the month of July-17. The Ser­vices sec­tor was weak­est per­form­ing in­dex drop­ping by 4.4 per­cent m-o-m, fol­lowed by the Hotels & Tourism in­dex and the In­sur­ance in­dex as their m-o-m re­turns came in 0.8 per­cent and 0.6 per­cent re­spec­tively. In earn­ings re­leases, NBB recorded a H1-17 net profit of BHD 31.74 mil­lion, com­pared to BHD 31.72 mil­lion H1-16. The Net In­ter­est In­come (NIM) for H1-17 was BHD 34.95 mil­lion, com­pared to BHD 31.82 mil­lion for H1-16, rep­re­sent­ing an in­crease of 9.8 per­cent. The in­crease in NIM was as a re­sult of growth in earn­ing as­sets and bet­ter as­set li­a­bil­ity man­age­ment lead­ing to an im­prove­ment in net in­ter­est mar­gin.

Mus­cat Se­cu­ri­ties Mar­ket

Oman was the only other in­dex in the GCC which saw de­clines dur­ing the month of July17, and re­mained the weak­est per­former in the GCC YTD. The bench­mark MSM in­dex was down 1.8 per­cent m-o-m, closed at 5024.24 points, and lost over 13 per­cent since the start of the year. All sec­toral in­dices closed in the red for the month. The In­dus­tri­als in­dex was the main lag­gard as it de­clined by 4.6 per­cent m-o-m, driven by a 9 per­cent drop in Ray­sut Ce­ment. Oman Ca­ble In­dus­try (-1.3 per­cent) and Oman Ce­ment Co (-0.5 per­cent) also wit­nessed lower lev­els as com­pared to the pre­vi­ous month. The Ser­vices in­dex fol­lowed with a de­cline of 3.8 per­cent driven by a 7.6 per­cent drop in Phoenix Power, fol­lowed by a 4.4 per­cent drop in Oore­doo. The Fi­nan­cials in­dex also saw lower lev­els and de­clined by 1.9 per­cent driven by Omin­vest that re­ceded by 3.5 per­cent m-o-m. Na­tional Bank of Oman fol­lowed and went down by 2.8 per­cent as com­pared to the pre­vi­ous month fol­lowed by HSBC Oman which de­clined by 2.4 per­cent as com­pared to June-17.

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