Market volatility led to risk-off trades and profit booking

KUWAIT: GCC markets remained volatile in November-17, as investor sentiment towards the region’s equity markets was more skewed towards risk-off trades. The MSCI GCC index declined by 1.1 percent for the month, and was down 2.6 percent YTD. Most markets slid during the month, while Saudi Arabia’s TASI stayed resilient and moved up by 1.0 percent m-o-m. Qatar’s equity indices continued its downward spiral (-5.5 percent m-o-m) on fears of deterioration of Qatar’s operating environment due to the ongoing diplomatic rift in the region.

GCC earnings growth for 9M-2017 and Q3-2017 was positive on a y-o-y basis, as total GCC 9M-17 earnings increased by 7.6 percent to $51.9 billion from $48.6 billion in 9M-2016, and Q3-17 net profits for GCC stocks improved by 13.6 percent to $13.1 billion. Oil market participants cheered the much anticipated extension of the oil production cut to keep 1.8 mb/d off the market through the end of 2018. OPEC oil prices gained by around $3/bbl from the start of the month and remain above $60/bbl.

UAE indices saw the Real Estate names come under extensive pressure on the ADX and DFM, due to broad based sector weakness, which also led to declines in the share price of Emaar Development, post its IPO listing. Kuwait witnessed declines as well, as the Weighted index dropped by 5.0 percent during the month, while large caps witnessed higher selling pressure as the Kuwait-15 index dropped by 6.1 percent m-o-m during November-17.

Trading activity during the month however recovered, but unlike last month, the drivers of higher activity were different. While in October-17 almost all the markets except for Qatar contributed to the higher trading activity, Saudi Arabia single handedly drove the increase in value traded in November-17. Monthly value traded reached an eight-month high level of $25.95 billion after trading activity in Saudi Arabia increased by more than 13 percent m-o-m to reach $20.1 billion.

Kuwait Kuwait’s equity indices witnessed their worst performing month for 2017 in November-17. Both the Weighted Index and the Price index declined by 5.0 percent and 4.9 percent primarily, as traders booked profits across the board. As a result, the Kuwait15 index also declined by a higher 6.1 percent m-o-m during the month. Nevertheless, Kuwait continues to remain one of the only two markets in the green on a YTD basis with a return of 4.9 percent for the Weighted index and 7.8 percent for the Price index. All the major sectors were down with Banks seeing the highest declines for the month as it went down by 5.8 percent m-o-m. The declines in banks were mostly driven by NBK and KFH as the stocks were down by over 6 percent for the month. Financial Services and the Real Estate sector followed as they receded by 5.4 percent and 4.8 percent for the month.

However earnings growth for companies on the KSE in 9M-17 was strong, as net profits grew by 15.4 percent y-o-y to reach KD 1.49 billion. Q3-17 earnings growth was also equally strong as net profits grew by 15.1 percent y-o-y as compared to Q3-16. Trading activity on the exchange dropped during the month, to a three month low.

Monthly value traded declined by close to 30 percent to reach KD 328 million as compared to KD 466 million during the previous month. Monthly volume receded by a higher 32 percent m-o-m to 1.7 billion shares from 2.5 billion shares during October-17. AlImtiaz Investment Group remained the top stock traded in terms of volume as 148.7 million shares were traded during the month. KFH came in second on the volume chart with a volume of 117.8 million shares followed by Investors Holding.

Group with volumes of 99.3 million. On the monthly value chart, KFH was the mostly widely traded stock as KD 64 million worth of shares were traded. NBK came in second with 46.5 million worth of shares traded during the month, followed by Zain and Al-Imtiaz with KD 43.8 million and KD 23.9 million in monthly value traded, respectively.

Prominent monthly decliners included Kuwait Remal RE as the stock plunged by over 35 percent for the month of November-17. National Shooting Co and Salbookh Trading Co followed with declines of 27.6 percent and 27 percent m-o-m. Amongst the gainers, Jiyad Holding led all stocks as its share price surged by over 30 percent for the month. Other gainers included Al-Argan International Real Estate and National Industries Co as their stock prices gained by over 19.7 percent and 19.0 percent respectively m-o-m. The monthly market breadth was skewed towards decliners with 119 companies losing ground while 23 companies gained.

In economic releases, the IMF expects real non-oil GDP growth to come in at 2.5 percent for 2017 and forecast real non-oil GDP to grow by 3.0 percent in 2018. Over the medium term the IMF expects non-oil growth to increase gradually to around 4 percent, driven by accelerated project implementation under the 5-year development plan and improved confidence. Despite the impact of higher energy and water prices, inflation is on track to reach a multiyear low of 1.75 percent in 2017, due to a decline in housing rents and lower food prices.

Saudi Arabia (Tadawul) Saudi Arabia’s benchmark TASI index was one of the best performing markets in the GCC for the month of November-17, as it gained m-o-m, while all other major markets lost ground during the month. The benchmark improved by 1.0 percent during the month while the performance of sectoral indices were mixed. Major indices such as Banks, Materials and Real Estate Management and Development were largely responsible for the TASI ending in the green, as there was a preference for large cap indices and names during the month, as more risk off trades were witnessed. Real Estate Mgmt. & Development was the best performing index as it went up by 2.3 percent m-o-m, as Dar Al-Arkan and Makkah construction both gained by double digits for the month. Banks followed with gains of 2.1 percent in November -17, driven mainly by a 7.4 percent increase in the share price of NCB. Amongst the decliners, Diversified Financials, Consumer Services and Media were major laggards as they registered double-digit declines for the month. Kingdom Holding and Assir Trading, Tourism & Manufacturing pulled down the Diversified Financials pack as both stocks declined by over 21 percent each.

Majority of the Consumer Services lost ground during the month, led by Al-Tayyar Travel Group, as the stock saw a fifth of its market cap erode m-o-m. Both 9M-17 and Q3-17 earnings growth for listed companies on the index were positive. 9M-17 earnings improved by 12.1 percent y-o-y from SAR 79.4 billion from a year ago to SAR 89.0 billion. Q3-17 earnings growth was higher as growth came in at 18.7 percent y-o-y from SAR 27.6 billion in Q3-16 to SAR 32.8 billion in Q3-17. Banks were the key growth drivers as they clocked an earnings growth of 14.3 percent y-o-y in Q3-17 to reach SAR 11.4 billion.

Abu Dhabi Securities Exchange The ADX index also witnessed declining trends, as the index lost ground by 4.4 percent during the month of November-17. The index closed at 4283.1 points, and remained in the red on a YTD basis. Sectoral performance involved mainly decliners, barring the Investment and Financial Services index remained stable and grew by a marginal 0.9 percent m-o-m. Telecoms were the worst performing index as they plunged by 8.1 percent m-o-m in November-17, as Etisalat dropped by 8.1 percent during the month, while Sudatel declined by 7.9 percent m-om as well. The Real Estate sector followed with declines of 7.4 percent m-o-m as the sector and related stocks saw weakness across the UAE during the month. Aldar Properties declined by 7.6 percent for the month, while Eshraq Properties dropped by a higher 8.9 percent m-o-m. Banks were also down by 2.4 percent m-o-m, First Abu Dhabi declined by 2.4 percent m-o-m, while ADCB receded by a higher 4.6 percent for the month of Nov-17.

GCC Equity Markets Monthly

Dubai Financial Market DFM was the worst performing index in the GCC for the month of November-17, as weakness was witnessed across the board, which sent the index into the red on a YTD basis. The index plunged by 5.9 percent mo-m and closed at 3420.17 points. Sectoral indices were mostly negative for the month barring the Services index and the Industrials sector, as they moved up by 1.4 percent and 0.7 percent respectively. Banks also remained relatively resilient as they receded by 1.6 percent m-o-m in November-17. The worst performing sectoral index was Consumer Staples as it witnessed double digit declines of 10.6 percent m-o-m for the month, primarily due to the 10.8 percent drop in the share price of Dubai Parks and Resorts. Real Estate and Construction companies followed as all traded stocks saw lower levels led by Arabtec which plunged by over 16.7 percent m-o-m, as investors look to avoid the sector. Weakness was also seen on the IPO market, as shares of Emaar Development that had an IPO price of AED 6.03/share, saw declines in early trades, ascribed to the weakness in the real estate market.

Qatar Exchange

The QE 20 index continued its declining trend for the fourth consecutive month and remains the worst performing market in the region YTD by far, declining eight out of the eleven months of 2017. The QE 20 index dropped by 5.5 percent m-o-m, and closed at 7714.3 points and has lost over a quarter of its market cap from the start of 2017. The Qatar All Share index, which maps the broader index, also witnessed a higher decline, as it went down by 6.6 percent m-om for the month of November-17. All indices closed in the red for the month. Market breadth was poor as 37 companies declined, while 6 companies advanced during the month. The Real Estate index was the main laggard, as the index plunged by 12 percent m-o-m, as Mazaya Qatar dropped by 16.7 percent m-o-m, while large caps Ezdan and Barwa declined by 15.8 percent and 6.7 percent respectively. The Insurance index with declines of 9.1 percent m-o-m followed, along with Industrials and Consumer Goods & Services as both indices receded by 7.4 percent each. Banks and Financial Services also saw declines, albeit lower and receded by 4.2 percent on the index, as QNB dropped by 3.7 percent m-o-m, while CBQ gained ground and went up by 1.9 percent m-o-m for the month of November-17.

Bahrain Bourse

The Bahrain All Share Index, continued to stay resilient amongst overall market volatility in the region’s stock markets, and closed in the green for the month of November-17. It remains the best performing market YTD, as the index closed 0.5 percent higher on a m-o-m basis for the month, which has extended YTD gains to +5.2 percent. The index closed at 1283.71 points at the end of the month. Sectoral performance was mixed but was more skewed toward indices that were down, as only the Investment Index and Industrials index gained during the month. Market breadth for the index showed weakness as well, as 8 stocks gained ground, while 17 stocks witnessed declines in their share prices. The Investment index was up 1.0 percent m-o-m, led by GFH was gained by 4.6 percent for the month of November-17. The Industrials index jumped by 10.8 percent mo-m during November-17, as Aluminium Bahrain single-handedly led to the surge in the index, gaining by 10.8 percent.

Muscat Securities Market Oman’s benchmark MSM 30 index was the best performing index in November-17, as it gained by 1.9 percent m-o-m, despite being amongst the worst performing markets YTD. Sectoral indices were up as well led by the Financials index, which went up by 4.3 percent m-o-m, driven mainly by National Bank of Oman which was up by 11.4 percent m-o-m. The Services index followed with gains of 1.4 percent m-o-m in November-17, while the Industrials index went up marginally by 0.5 percent m-o-m. Earnings declined for companies on listed on the MSM in 9M-17, as net profits dropped by 19.0 percent y-o-y to reach OMR 489 million. Q3-17 earnings dropped as well y-o-y, as net profits declined by 11.3 percent y-o-y to OMR 169.3 million as compared to OMR 191 million in Q3-16.

The Financials sector witnessed a drop of 3.4 percent y-o-y in Q3-17 profits to OMR 91.1 million from OMR 94.4 million in Q3-16, mainly due to the 33.4 percent drop in National Bank of Oman’s net profits during the period.