TOP 100 GCC COMPANIES
RISING THROUGH THE RANKS OR DROPPING DOWN THE LIST? THE GAMECHANGERS AND PLAYMAKERS OF 2016
Falling oil prices and economic uncertainty have had a mixed impact on the region’s stock markets and, as a result, our top 100 companies list. Read on to find out the ups and downs among the region's leading businesses
It has been a difficult time for companies in the GCC, where indices continued to witness declines in 2016 due to persistent low oil prices, poor corporate earnings and diminished investments into equity markets.
Saudi Arabia’s Tadawul (TASI) has shed 18.5 per cent in the year to date (YTD), becoming the largest loser in the region. The kingdom’s shares bore the brunt of the negative investor sentiment due to indecision prevailing among OPEC and non-OPEC members to freeze oil production. Kuwait and Bahrain bourses registered losses of 8.8 per cent and 6.5 per cent respectively. Meanwhile, the S&P GCC Composite index tumbled 9.8 per cent, mainly due to the drag of the TASI, as the region’s largest index.
With the exception of the UAE and Oman, all other equity indices in the GCC have declined in value in 2016. Oman’s corporate earnings increased by 7 per cent year-on-year (YoY) in H1 2016 mainly owing to higher earnings in the construction sector. Following the positive earnings, Oman’s indices ended 3.8 per cent higher. Interestingly, Abu Dhabi and Dubai indices increased by 1.9 per cent and 6.5 per cent despite a fall in their corporate earnings. Overall, H1 2016 was another lackluster period for GCC markets after falls in 2015.
Emerging markets have become the favourite destinations for foreign investors with US interest rates remaining low. India’s Sensex has gained 7.3 per cent YTD with $5.8bn worth of invest- ments flowing into the mid cap and small cap stocks in the market. The MSCI Emerging markets index and MSCI BRIC index have also gained 15.2 per cent and 15.8 per cent respectively. Markets in the advanced economies were also positive with the S&P 500 and the UK’s FTSE increasing by 5.4 per cent and 12.8 per cent respectively.
According to the monthly market review published in October 2016 by Markaz, Brent crude has risen 4.3 per cent to close at $49 per barrel, which represents a YTD increase of around 32 per cent. This followed a 6 per cent increase in September 2016, amid signs OPEC countries would agree to freeze production. The group reached an agreement to limit its production within a range of 32.5-33 mil- lion barrels per day (bpd) in talks held on the sidelines of September's International Energy Forum in Algiers. The deal is expected to be finalised during a policy meeting in November.
GCC countries are turning to both domestic and foreign debt markets to finance their rising fiscal deficits, and this trend is likely to persist in the short to medium term. Since mid-2014, the drop in oil prices has shifted the large aggregate current account surpluses of GCC countries, accumulated in the past decade, to a deficit of $35bn in 2015. This is expected to widen to $89bn or 6.5 per cent of the GDP in 2016, indicating an unfavourable change in the macroeconomic situation in GCC in the last one and a half years.
Saudi Arabia has scaled down its investments in various projects it had planned earlier. The value of contracts awarded plummeted by 39 per cent in the first quarter of 2016 followed by a decline of 27 per cent in the second quarter on a quarter-on-quarter basis. Contraction in spending in the economy made investors skeptical and they heavily withdrew from Saudi stocks.
In measures to save the equity markets and boost investments, Saudi Arabia has said it will lift restrictions on foreign investment in its securities markets on
Saudi Basic Industries Corporation