GCC markets see marginal gains after a late month recovery on oil

KUWAIT: Taking cues from global weakness, GCC markets trended downward during the start of September-18, only to recover during the second half of the month. This trend was particularly visible in Saudi Arabia, on the back of higher oil prices and attractive valuations in the GCC as compared to most of the other emerging markets across the globe. In terms of monthly sector performance, energy stocks recorded the biggest gains during the month, supported by an oil price recovery, followed by Insurance and banking stocks, while the other sectors declined.

Globally, most markets witnessed weak trends during the month, as the ongoing USChina trade war intensified after both the trading partners imposed additional tariffs on trades between the two countries. Manufacturing activity in China has already started showing signs of softening, while surveys point to a cooling down in domestic and export demand.

Meanwhile, oil prices have provided strong support to oil exporting gulf economies with crude prices reaching 4-year high, led by US sanctions on Iran that have gradually started reflecting in oil market fundamentals. Brent crude futures reached $82.7/b on the back of tightening oil supply while GCC producers added production.

Investors also took positions in GCC stocks amid an emerging market turmoil that has affected most of the emerging market currencies against the USD. As most of the GCC currencies are pegged to the USD, the impact on the economy was minimal, and is also supported by strong government balance sheets of most countries in the region. Moreover, the healthy project market in the region that got additional support from upcoming plans from Saudi Arabia to boost spending next year also supported markets towards the end of the month.

Kuwait

Kuwait’s benchmarks indices witnessed mixed performance during September-18 as gains recorded by large-cap names were offset by weakness in small-cap stocks. Investors continued to buy blue-chip names in anticipation of the market upgrades. During the month, Kuwait witnessed the first phase of the FTSE upgrade in which 12 stocks were included in the index compiler’s Secondary Emerging Market index. Index trends during the month clearly showed investors interest with the Premier Market index up by 1.6 percent while the Main Market and the All Share Market Index declined by 3.3 percent and 0.1 percent, respectively. The steep decline in the Main Market index pushed YTD-18 returns in the red zone to show a decline of 1.9 percent, while the Premier Market index gains were double digit at 11.5 percent that pushed gains for the All Share index to 6.2 percent. The sector performance chart reflected the effects of higher oil prices with the Basic Materials and Oil & Gas indices as top monthly performers with returns of 4.1 percent and 3.4 percent, respectively, followed by Insurance and Bank indices at around +2 percent.

The Real Estate Index was the top decliner for the month with a fall of 9.6 percent. Trading during the month was boosted by the FTSE upgrade. The day before the upgrade, on 20September-18, the exchange recorded KD 167.3 million worth of trades, the highest daily value traded since May-2013. Volume during the day was also the highest in 17 months at 345.6 million. For the full month, total value traded was up almost 50 percent to reach KD 523.8 million as compared to KD 356.5 million during August-18. Volume traded also surged, although at a much slower pace or 17.4 percent to reach 2.1 billion traded shares. The m-o-m increase in trading activity also came as a result of a lower base during August-18 due to the week-long holiday. NBK (+3.7 percent) topped the trading activity in terms of monthly value traded recorded at KD 116.0 million followed by KFH (+1.7 percent) and Zain (-0.2 percent) at KD 90.9 million and KD 55.4 million, respectively. In terms of monthly volume, Al-Tameer Real Estate Investment Co. (-1.0 percent) topped the chart with 172 million shares changing hands during the month followed by KFH and NBK at 152 million and 140.4 million traded shares, respectively.

Saudi Tadawul

Saudi market witnessed a spike in volatility during September-18 with the benchmark reaching 6-month low during the first half of the month amid a broader emerging market sell-off followed by a strong recovery during the second half that saw the index reaching a one-month high level. TASI closed the month with a gain of 0.65 percent to reach little short of the 8,000 mark at 7,999.5 points after gaining 1.3 percent in the last trading session. The monthly gain further pushed YTD-18 gains to 10.7 percent. Gains during the month were led by a strong recovery in shares of large-cap stocks after being battered during the first half sell-off by foreign institutional investors.

Abu Dhabi Securities Exchange Similar to other frontline GCC indices, the ADX index was broadly rangebound in Sept-18 and closed marginally lower by 1.0 percent mo-m at 4835.37 points. Market breadth favored decliners, as 16 stocks gained, while 27 stocks declined. Sectoral performance also included more decliners than gainers. Energy was the best performer during Sept-18, as the index closed higher by 3.4 percent m-o-m, led by Dana Gas which gained by 6.3 percent m-o-m. Investment and Financial Services followed with gains of 1.9 percent m-o-m, as Waha Capital single handedly drove the increase, as the stock was up by 2.2 percent in Sept-18.

Dubai Financial Market

After declining by 3.9 percent in Aug-18, the DFM index closed broadly flat, declining only marginally. The index declined by 0.2 percent m-o-m and closed at 2834.95 points, as the performance of sectoral indices was mixed. Insurance was the best performing index, as the index went up by 19.5 percent, driven mainly by the 47.4 percent gain in the share price of Islamic Arabic Insurance Co. Banks followed as the index went up by 3.0 percent m-o-m, driven by Commercial Bank of Dubai, which gained by 5.1 percent followed by a 1.6 percent gain from Emirates NBD.

Qatar Exchange

Qatar exchange closed marginally down in Sept-18 but continues to lead other regional markets YTD. The QE 20 index declined by 0.7 percent m-o-m to close at 9813.32 points in Sept-18. The Qatar All Share index which maps the broader market, closed flat as compared to the previous month. Market breadth favored decliners as 26 companies receded, while 18 companies moved higher as compared to the previous month. Sectoral performance was mixed and included both gainers and losers.

Bahrain Bourse

The Bahrain Bourse was amongst the few gainers in the GCC for the month of Sept-18, albeit marginally. The Bahrain Bourse closed at 1338.55 points, gained by 0.5 percent m-o-m and remains flat on YTD basis as well. Commercial Banks went up by 0.7 percent mo-m, driven by AUB as the stock rose by 0.8 percent m-o-m over the same period, followed by Al Khaleeji Commercial Bank and Al Salam Bank as they moved up by 3.5 percent and 2.0 percent respectively.

Muscat Securities Market MSM recorded the second consecutive month of growth during September-18 and was one of the top performers in the GCC during the month. The benchmark MSM 30 index recorded the best monthly performance in the GCC during the month. The index witnessed positive trend since the start of the month with almost two weeks of consecutive daily gains, albeit marginal.