Global market decline affects GCC indices, hits trading activity

KUWAIT: After starting the year on a positive note, GCC markets retreated during February-18 led by softness in global equity markets despite a largely positive earnings season. GCC Benchmark indices witnessed steep declines during the first two weeks of the month followed by minimal recovery during the third week but failed to keep the momentum and declined towards the end of the month.

Last month’s best performer Qatar was the biggest loser during February-18 shedding almost 6.0 percent followed by slide in Dubai and Saudi Arabia benchmarks. Among the major decliners, stocks in the real estate, insurance and capital goods sectors witnessed the steepest decline, while banking and telecom stocks also faced pressure, resulting in around 2.2 percent decline in the MSCI GCC Index. Real estate stocks, especially in Dubai with a YTD-18 decline of 7.3 percent, have been battered recently due to falling property prices coupled with oversupply concerns.

The start of the month witnessed one of the biggest single day decline in major global indices, especially in the US, led by a number of factors including an expected long-pending correction, scale back in quantitative easing by central banks and rising interest rates, although economic fundamentals and economic growth remains strong. GCC markets also took a hit from the global sell-off but were quick to recover in the subsequent week in line with a recovery in other markets globally. For the GCC markets, a weak oil market also capped growth during the month.

In terms of trading activity, total value traded on GCC exchanges declined to the lowest in 5-months recorded at $22.3 billion, a 21 percent decline as compared to the previous month. Kuwait and Qatar witnessed the steepest drop in value traded that dropped more than a third while in Saudi Arabia it dropped by 17.5 percent or $3.8 billion to $18.6 billion.

Boursa Kuwait

Kuwait continued on a gradual recovery process during February-18 and was the second-best performing market in the GCC during the month. All the three benchmark indices have grown consecutively over the past three months with the Price index surging almost 10 percent since the end of November-17. During February-18, the Kuwait Price Index surged 1.3 percent bringing YTD-18 gains to 5.7 percent, the highest in the GCC. The increase in the Weighted Index was more modest at 0.5 percent while the Kuwait 15 Index saw a healthy growth of 1.8 percent, indicating that large-cap stocks supported overall growth during the month while cheap stocks declined.

The monthly sector performance chart was topped by the Technology index that surged 13.9 percent as both constituents ASC and Osos recorded more than 10 percent returns. The Insurance sector was the second-best performing index with a gain of 4.9 percent led primarily by 18.6 percent surge in shares of Ahleiah Insurance although trades were minimal in the stock. Banking stocks were also upbeat with a benchmark return of 2.0 percent with only two Kuwaiti banking stocks showing a monthly decline. CBK was the best performing bank with a return of 13.3 percent after the bank reported 10 percent growth in net profit. Overall earnings growth for Kuwaiti banks was positive with a net profit growth of 9.4 percent, although the decline reported by KIB and Burgan Bank partially dented sector earnings. Sectors on the decliners side included Healthcare with a decline of 6.1 percent followed by Consumer Services and Financial Services indices with declines of 5.9 percent and 2.8 percent, respectively.

In terms of trading activity, the exchange recorded the steepest monthly decline in the GCC. Total monthly volume traded halved to 1.3 billion shares as compared to 2.6 billion shares during the previous month, while monthly value traded declined by more than a third to KD 207.3 million as compared to KD 322.9 million during January-18. Shares of NBK (+4.1 percent) garnered the most interest in terms of value traded recording total trades worth KD 32.5 million followed by KFH (+0.7 percent) and Zain (+1.3 percent) at KD 26.8 million and KD 16.6 million, respectively. In terms of monthly volume, Ithmaar Holding topped with 207.5 Mn traded shares followed by shares of AUB Bahrain and Alimtiaz Investment recording 61.8 million and 54 million shares traded during the month, respectively. The monthly gainers chart was topped by REAM recording a gain of 87.8 percent, although with miniscule trades in the stock, followed by Osos Holding and Ahleiah Insurance with gains of 18.8 percent and 18.6 percent, respectively. On the decliners chart, Ithmaar Holding topped with a fall of 38.8 percent, followed by 34.9 percent decline for Yiaco Medical and 29.7 percent decline for National Shooting. In economic news, S&P retained Kuwait’s sovereign rating at ‘AA/A-1+’ with a stable outlook and said that the country is expected to return to growth in 2018 despite being an “undiversified” market based on their criteria. The rating is supported by Kuwait’s large government and external balance sheets and S&P expects a growth rate of 2.5 percent in 2018 supported by higher crude prices.

Tadawul

The positive trend in Saudi Arabia’s benchmark TASI reverted and declined for the first time in four months by 3.0 percent during February-18 led by weak trends in global equity markets. The index recorded minimal recovery during the third week and reached 7,418.8 points at the end of the month resulting in a lower YTD-18 gain of 2.7 percent. The monthly sector performance chart also showed declines in large-cap sectors like Banks, Materials and Real Estate. The Real Estate sector witnessed the biggest decline during the month at 8.1 percent as all the real estate stocks, with the exception of Alandalus Property and Arriyadh Development, closed the month with a decline. The Banks index was down by 3.6 percent during the month, as all the banks closed the month with a decline. Bank Al-Jazira witnessed the steepest fall of 12.2 percent followed by The Saudi Investment Bank that declined by 10.0 percent. Shares of NCB also declined marginally by 1.2 percent despite the sector witnessing a solid earnings growth of 9.5 percent for 2017.

Abu Dhabi Exchange

The ADX index ended Feb-18 broadly range bound, marginally declining by only 0.1 percent m-o-m, after gaining by 4.6 percent m-o-m in Jan-18. The index closed at 4597.7 points as sectoral performance was mixed for the month. The Energy sector was the best performing index as the index was up by 5.1 percent m-o-m, driven single-handedly by TAQA, as its share price was up by 48.1 percent m-o-m. Investment & Financial Services (+3.5 percent m-o-m) and Banking (+1.5 percent m-o-m) indices followed the sectoral gainers list. Investment & Financial Services index was buoyed by Waha Capital, which gained by 3.9 percent m-om. The positive performance of Banks was driven by mega cap First Abu Dhabi Bank, as its share price gained by 3.1 percent m-o-m.

Dubai Financial Market

The DFM index unlike its UAE counterpart came under pressure in the month of Feb-18 and declined by 4.4 percent m-o-m. The index closed at 3244.1 points, as most sectoral indices closed lower during Feb-18. Consumer Staples was the main laggard and plunged by 12.8 percent m-o-m, driven mainly by DXB Entertainment, as its stock price dropped by 13.3 percent m-o-m. The stock came under pressure after the theme park operator reported a net loss of AED 1.11 billion in 2017 as against AED 485 million. Further, the company is reportedly talking to banks to restructure $1.15 billion in loans after footfalls fell behind expectations. The Real Estate sector followed, as it dropped by 7.8 percent m-o-m, as no stock in the index saw higher levels during Feb-18.