TOP 100 GCC COM­PA­NIES

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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

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