Cost of reform rises with missed opportunities
Boursa Kuwait performance during November more active
About 25 years have already passed since the liberation of Kuwait during which 11 parliamentary elections were conducted, including 7 rounds in the last 11 years (2006-2016), an average of one election every one year and slightly more than half the year — 1.57 years — and the average of voters decreased to 59.1%, while the average was one election every three and half years period (1992-2003) during which four elections were conducted, and the average of voters during the elections reached about 81.5%. Quick elections pace during the last period indicate regression in the democratic approach and gives evidence of the instability case. Results of the latest elections — of November 2016 —strongly suggest an angry reaction to proliferation of corruption, absence of development approach and a feeling of anxiety about the future, says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.
The schedule below displays percentages of change in the 11 election rounds and the change rate in the number of members of the current National Assembly scored 60%, the second highest after the revoked National Assembly — December 2012 — which was an extraordinary National Assembly in which voters percentage accounted for 39.6%, the lowest after the 1990 National Council. The number of those who abstained from nomination from the number of members in the preceding assembly and who have great opportunities for success was a record number.
The recent change is close to the quality of change in February 2012 elections, which came as punishment for both the former Assembly and former Government. Changing 30 deputies, including two Ministers, is an indicator of the extent of voters’ anger, corruption proliferation, poor achievement and priorities inversion. The country will reap the outcome of this change if the message is well received and understood, and the change was accompanied by a fundamental change in the approach and characters of the forthcoming Government which has much more authority than that of the National Assembly, including participation by about 14 Ministers who also serve as deputies. Unfortunately, early indications suggest the opposite.
Either the message was not understood and the National Assembly will turn into a war zone whose beginning will be confrontations to change laws and an approach by which the outgoing Government and Assembly tried to hit and alienate their opponents. They succeeded superficially but the outcome of the election was a conclusive indicator of their failure in reality. Under the severe decline in the country’s financial capability coupled with the direct and proxy wars in the neighborhood, and the decline of the likely significance of oil in the energy market in future, it is certain that Kuwait will not endure the confrontation atmosphere and more of breaking the internal situation into pieces. Surely, clash would lead to the failure of any financial and economic reform effort, in addition to more of corruption spreading to buy the Government’s permanence.
The summing up of the near future is a new dissolution of the National Assembly, to the suppressed angry and to the political chaos. And we only hope to stop the flow of lost opportunities and read the message correctly. With each missed opportunity the cost of reform increases with less chances of success. Muscles shrink and mind is almost absent. Unfortunately, the outgoing government may be cloned even though some or majority of its characters may change.
Oil and Public Finance —
November 2016
By the end of November 2016, the 8th month of the current fiscal year 2016/2017 ended and average price for Kuwaiti oil for November scored US$ 41.5 per barrel, down by US$ -5 per barrel (-10.8%) from the average of October which was at US$ 46.5 per barrel. But it is higher by US$ 6.5 per barrel, 18.6%, than the new hypothetical price estimated for the new budget at US$ 35 per barrel. Therefore, the average Kuwaiti oil price for the first eight months of the current fiscal year scored about US$ 41.7 per barrel, which is less by US$ -8.2 per barrel, -16.4%, than the average price for the first eight months of the last fiscal year at US$ 49.9 per barrel. The past fiscal year 2015/2016 which ended on March 31, 2016 scored an average of US$ 42.7 per barrel for Kuwaiti oil. This means the average price of oil for the first eight months of the current fiscal year is lower by about -2.4% than the average price of the barrel of oil for the past fiscal year.
Kuwait is supposed to have achieved actual oil revenues in November in the amount of KD 1 billion. Assuming that production and prices would continue at the current levels — an assumption which may not be realized — Kuwait would achieve about KD 12.3 billion in oil revenues for the entire current fiscal year, which is KD 3.7 billion higher than the amount estimated for the entire current fiscal year budget at KD 8.6 billion. Adding an amount of KD 1.6 billion in non-oil revenues, projected budget revenues would score KD 13.9 billion for the entire current fiscal year. Comparing this figure with KD 18.9 billion as expenditures allocations, it is likely the budget would achieve a deficit by KD 5 billion in the FY 2016/2017; however, this figure depends mainly on the average oil prices and its production quantity in the remaining part of the current fiscal year (4 forthcoming months) and the likely control of estimated expenditures, i.e. achieving saving therein.
To sum up, the financial deficit has become real and recurrent. And in addition to the inevitable increase of expenditures in the future due to increasing population and inflation rates, a new and increasing item will be added to pay loans premiums and interests. Any illusion that the financial conditions of the country are comfortable, which will stifle the public administration’s efforts for reform, will have serious consequences in the near future.
Performance of Boursa Kuwait
— November 2016
Boursa Kuwait performance during November 2016 was more active compared with October’s performance. All indexes including traded value, trade volume, number of transactions, and value of General Index (Al Shall) increased. Al Shall index reading in the end of Wednesday, 30 November 2016 scored 349.4 points, noticeably up by 14.1 points, or by 4.2%, compared with its closure in the end of October at 335.2 points. It however dropped by 29.5 points i.e around 7.8% compared with November 2015. The highest reading during the month was at 357.6 points on November 15, 2016 and the lowest reading was at 335.6 points on November 01, 2016.
All main Boursa Kuwait indexes rose despite the slight decline in oil price vis-‡-vis October 2016, perhaps due to the positive results of some companies. The price index rose and scored 5,554.5 points (5,401.1 points in the end of October 2016), a rise by 2.8%. Likewise, the weighted index rose to about 367.1 points (compared to 354 points), arise by about 3.7%. Because most trading was on big companies’ shares. Kuwait 15 index, also rose to 855.2 points (826.5 points at the end of October 2016), a rise by 3.5%. When we compare the performance of the main indexes (price, weighted, and Kuwait 15) with their readings at the end of 2015, we notice their continued losses by (-1.1%, -3.8%, and -5.0%) respectively.
Value of traded shares (during 22 working days) scored KD 328.5 million (US$ 1.082 billion), an increase by KD 70.5 million, or by 27.3%, compared with the previous month, which scored KD 257.9 million. It remained higher by 4.9% than its value in the same month of 2015. The highest daily trading value during the month was at KD 22.2 million on November 08, 2016, while the lowest daily trading value was recorded on November 27, 2016 at KD 4.5 million. The daily average value of traded shares scored KD 14.9 million (KD 12.3 million in October 2016), a rise by 21.6%. The banking sector took the lead in liquidity and captured KD 118.9 million, or by 36.3% of total market trading value. The financial service sector came second by 19.5% and thirdly came the real estate sector by 10.7%.
Total volume of traded shares scored 2.908 billion shares, up by 73.1% when compared with 1.679 billion shares at the end of October 2016. The daily average approached 132.2 million shares up by 52.2 million shares or 65.3%. Number of transactions scored 70.6 thousand, a daily average of 3,210 transactions reflecting a rise by 49% (2,154 deals in October 2016).
Market capitalization value of all listed companies — 186 companies — after listing Safat Global Holding, during November 2016 scored about KD 25.362 billion. If we compare their value with the end of October 2016 for 185 companies, we note they scored KD 25.360 billion, up by 3.7%, which reflects the rise in the weighted index. But if we compare their value with the end of December 2015 for 185 companies, we note they dropped by KD 721.4 million, from KD 26.082 billion to KD 25.360 billion, or a drop by 2.8%.
It is worth mentioning that the number of gainers compared with the end of 2015 was 70 companies out of 185 common companies. 108 companies recorded varying drops in their values, while values of 7 companies did not change.
After excluding the companies whose capitals were either increased or reduced, Kuwait Bahrain International Exchange Company scored the highest rise in value by 1053.9%. GFH Financial Group came next by 289.5% rise. On the other hand, Taiba Kuwaiti Holding Company scored the highest drop in value by 75% and Ikarus Petroleum Industries Company came next in losses by 65% of its value.
Six sectors, out of twelve, increased in value with the Healthcare sector achieving the highest gain by 31.6%. The insurance sector scored the highest drop by 14.9%.
The following graph illustrates the distribution of market value according to sectors as of the end of November 2016.
Burgan Bank Financial Results
— 30 September 2016
Burgan Bank announced results of its operations for the first nine months of the current year, which indicate the bank achieved profit, after deducting taxes, by about KD 48.1 million, dropped by KD 18.1 million or by -27.4%, vis-a-vis KD 66.2 million in the same period of 2015. Most of the drop in the bank profits is due to the drop in total operational incomes against rise in total operational expenses. Therefore, the operational profit of the bank dropped by 12.8%, or KD 13 million.
In details, total operations income decreased by KD 12 million, or by 6.6%, and scored KD 169.1 million (KD 181.1 million in the same period of 2015). That resulted from drop in most items of operational income. Item of net gain from foreign currencies decreased by KD 15.3 million, or by 61.2%, to KD 9.7 million (which represents 5.7% of total incomes) versus KD 24.9 million (13.7% of the total). Likewise, item of net of other incomes dropped by KD 2.6 million to KD 2.8 million (KD 5.3 million). However, the item of net investment incomes rose by KD 7.9 million to KD 10.3 million (KD 2.4 million).
Total operations expenditures (staff and other expenses) increased by KD 993 thousand or by 1.2%, and scored KD 80.7 million (KD 79.7 million). Ratio of total operational expenses to total operational incomes scored about 47.7% versus 44%. Total provisions dropped by KD 768 thousand, or by 2.2%, and scored KD 33.8 million (KD 34.6 million). This explains the drop in the net profit margin to 20.6% versus 34.1% in the same period of 2015.
The bank’s total assets increased by KD 274.9 million, or by 4%, to KD 7.100 billion (KD 6.825 billion in the end of 2015). They however dropped by KD 753.8 million, or by 9.6%, if compared with the total assets in the same period of
2015 when it scored KD 7.853 billion. Volume of loans and advances to customers increased by 6% to KD 4.254 billion (59.9% of total assets) versus KD 4.012 billion (58.8% of total assets) in the end of 2015. It however dropped by 3.4% rate when compared with KD 4.404 billion (56.1% of total assets). Percentage of loans to deposits and other balances scored about 75.3% versus 68.1%.
Figures indicate that the bank’s total liabilities (without calculating total equity) increased by KD 290 million, or by 4.8%, and scored KD 6.278 billion compared with KD 5.988 billion in the end of 2015. If compared with the total liabilities of its value in the same period of 2015, we note they decreased by KD 633.3 million, or by 9.2%, when it scored KD 6.912 billion. Percentage of total liabilities to total assets scored 88.4% versus 88%.
Results of analyzing the bank’s financial statements on annual basis indicate that all bank’s profitability indexes dropped compared with the same period of 2015. The return on average equities relevant to shareholders (ROE) decreased to 10.3% (12.1%). The return on average capital (ROC) also dropped to about 31.3% (44.1%). The return on bank assets (ROA) decreased to 0.9% (1.1%). Earnings per share (EPS) dropped to 18.6 fils (23.7 fils in September 2015). (P/E) scored 13.1 times (12.2 times) due to the decrease in the EPS by 21.5% compared with its level in September 2015. The market price declined by 15.6% compared with its price on September 30, 2015. (P/B) scored 0.81 times versus 0.84 times for the same period of 2015.
The Weekly Performance of
Boursa Kuwait
The performance of Boursa Kuwait for last week was mixed compared to the previous one, where the traded value index, the traded volume index, and the number of transactions index, showed a decrease, while the general index showed an increase, Al Shall Index (value weighted) closed at 352.6 points at the closing of last Thursday, showing an increase of about 0.4 points or about 0.1% compared with its level last week and it decreased by 13.3 points or about 3.6% compared with the end of 2015.
The following tables summarize last week’s performance of Boursa Kuwait
KUWAIT CITY, Dec 1: Kuwait stocks kicked off the month on a firm note after eking gains in the last four sessions. The bourse climbed 14.54 points in choppy trade to 5,569 points as sentiment were buoyed by the OPEC oil output deal. Most of the banks were muted while some of the low and mid caps shone.
The KSX 15 gauge rose 7.25 points to 862.41 pts and is down 22 points year-to-date while weighted index added 2.48 points. The volume turnover meanwhile rose further to hit a one-month high. 174.9 million shares changed hands — a 40 percent surge from Wednesday
The sectors closed mostly in the green turf. Basic materials outshone the rest with 2.93 pct gain whereas technology skidded 14.3 percent, the biggest loser of the day. In terms of volume, real estate notched the highest market share of 38 percent while financial services stood next with 34 pct contribution
Among the day’s prime movers, National Bank of Kuwait rose 10 fils on back of 2.25 million shares and KIPCO was up by same measure to wind up at KD 0.510 with thin trading. Humansoft Holding extended its rally with a hefty 100 fils gain whereas OSOS tumbled 50 fils.
Zain was up 5 fils at 405 fils taking the year’s gains to 55 fils while Wataniya Telecom (Ooredoo) stood pat at KD 1.160. Kuwait Telecommunications Co (VIVA) climbed 10 fils to 900 fils and Agility followed suit to settle at 570 fils after trading over 3 million shares.
Kuwait Finance House was unchanged at 500 fils off early highs and Ahli United Bank too did not budge from its earlier close of 390 fils. The bank has registered a nine-month net profit of KD 39.13 mln and earnings per share of 25.1 fils.
The market opened on tame note and slipped slightly in early trade. The price index plumbed the day’s lowest level of 5,526.59 points and rebounded thereafter. It sagged marginally past the mid-session and rose further to close with modest gains.
Top gainer of the day, Investors Holding Group rallied 12.2 percent to 23 fils while Al Aqaria climbed 8.89 pct to stand next. OSOS dived a whopping 23.36 percent, the steepest decliner of the day and Investors Holding Group also topped the volume with 33.65 million shares.
Reflecting the day’s upswing, the market spread was skewed towards the winners. 58 stocks advanced whereas 31 closed lower. Of the 127 counters active on Thursday, 38 closed flat. 3,548 deals worth KD 16.2 million were transacted — a 19 pct dip in value from the day before.
National Industries Group rose 6 fils on back of 4.4 million shares while Gulf Cable paused at 375 fils off slight early lows. Kuwait Portland Cement shed 20 fils and Heavy Engineering Industries and Shipbuilding Co took in 2 fils.
Kuwait Food Co ( Americana) was unchanged at KD 2.620 while Combined Group Contracting Co slid 30 fils. ALAFCO fell 4 fils to 214 fils and Jazeera Airways too did not budge from its earlier close of 800 fils. NAPESCO climbed 10 fils to 800 fils.
Stalled
Kuwait Foundry Co stalled at 172 fils and RISCO was up 10 fils at 320 fils. The company has posted a net profit of KD 4.64 million and earnings per share of 47.37 fils in the nine-month period ending Sept 30, 2016.
ACICO Industries Co stagnated at 265 fils and Qurain Petrochemical Industries Co added 10 fils. The company has registered a net profit of KD 10.48 m and earnings per share of 10.08 fils in the JanuarySeptember period.
Al Kout Industries climbed 20 fils to 640 fils and Boubyan Petrochemical Co was up 10 fils at 465 fils. IFA Hotels and Resorts added 10 fils whereas UPAC was unchanged at 630 fils. AWJ Holding rose 3 fils on back of over 3 million shares and Equipment Holding Co clipped 1.5 fils.
Kuwait and Gulf Link Transport Co tripped 1 fil whereas KGL Logistics fell 3 fils to 68 fils. Zimah Holding edged 1.5 fils higher to 42 fils and Mezzan Holding jumped 20 fils. Al Rai Media Group took in 2 fils and Ek Holding followed suit.
In the banking sector Gulf Bank and Commercial Bank were flat at 232 fils and 410 fils respectively whereas Boubyan Bank gave up 5 fils to end at 390 fils. Ahli United Bank stagnated at 390 fils off early lows.
Burgan Bank stood pat at 310 fils and Kuwait International Bank followed suit to wind up at 202 fils. Warba Bank closed 4 fils higher at 218 fils.
Kuwait Investment Co paused at 80 fils while National Investment Co and Coast Investment Co took in 1 fil each. Securities House Co eased 0.5 fil after trading over 2 million shares and KFIC followed suit.
Unicap and Al Mal Investment Co rose 1.5 fils and 1 fil respectively whereas NIH slipped 2 fils to 59 fils. Sokouk Holding and Al Madina eased 0.5 fil each whereas Noor Financial Investment closed 0.5 fil in green. Kuwait Financial Centre (Markaz) stalled at 83 fils.
Kuwait Real Estate Co and United Real Estate Co dialed up 1 fil each whereas National Real Estate Co added 3 fils. Salhiya Real Estate held ground at 375 fils.
The market has been upbeat far during the week. The main index closed higher in all the 5 sessions and climbed 52 pts week-on-week. It had gained 151 points during whole of November but is down 0.82 pct year-to-date. KSE, with 208 listed companies, is the second largest bourse in the region.
In the bourse related news, Shuaiba Industrial Co has recorded a net profit of KD 1.66 million and earnings per share of 20.94 fils in 2016, 9M up from net profit of KD 1.33 mln and earnings per share of 16.83 fils in same period of 2015.
Aqar Real Estate Investments Co has registered a net profit of KD 923,223 and earnings per share of 4.34 fils in the January-September period down from net profit of KD 1.72 million and EPS of 7.63 fils in the 9M of 2015.
Jeeran Holding Co has logged a net profit of KD 431,750 and earnings per share of 3.17 fils in the first nine-month of 2016 up sharply from net profit of KD 177,518 and earnings per share of 1.30 fils in the 9M of 2015.
Kuwait Building Materials Mfg has registered a net profit of KD 159,204 and earnings per share of 5.3 fils in the January-September period as against net profit of KD 363,059 and earnings per share of 12 fils in the same period last year.
Hilal Cement Company has logged a net loss of KD 3,709 and loss per share of 0.04 fil in the January-September period of 2016 narrowing from a net loss of KD 117,151 and LPS of 1.39 fils in same period in 2015.