Listed cos cut step towards right path
Boursa Kuwait performance during week less active
Both Capital Markets Authority (CMA) and Boursa Kuwait Company are seemingly planning and working to reduce — the number of listed companies — to be smaller, as appropriate with its current liquidity values, and most importantly, its components will become better in the current year 2017 and until the end of last April, the optional withdrawal from listing was completed for 7 companies and thus the number of the remaining listed companies is 177 companies. Additional 8 companies will complete their delisting until the end of the year and so the number of listed companies will be 169 companies. Out of 15 companies required to reconcile their positions with continuing listing requirements, CMA decided to transfer 11 companies to the parallel market which will reduce the number of listed companies by the end of the current year to 158 companies. 4 additional companies were given an additional period until next August to reconcile their positions. The unsuccessful ones will be moved to the parallel market says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.
Most of the withdrawing or transformed companies to the parallel market are weak in both value and liquidity. The 7 withdrawn companies represent 3.8% of the number of listed companies but they contribute only 0.54% of the value of Boursa companies. The other 8 companies which are likely to withdraw by the end of the current year represent about 4.5% of the remaining listed companies and contribute only 0.74% of the value of listed companies. The 11 companies which moved to the parallel market represent only about 6.5% of the remaining listed companies’ number and contribute only by 0.3% of the Boursa companies’ value.
AlShall mentioned in more than one report that Boursa Kuwait is perhaps the most crowded regional share markets in the number of companies, nevertheless, it is the weakest in terms of liquidity per company share vis-à-vis the other four relatively large regional markets. Even in 2008, production and listing companies at Boursa Kuwait was a target in itself. Despite the essential change in the business environment in the post-crisis, this illusion continued prevalent until 2011 when the number of listed companies maximized and caused needless costs.
The continuation of both CMA and Boursa Kuwait Company in their project to restore the Boursa to its healthy size is a sound policy. Risks will drop, harmful speculations will also decline, and the orientation and distribution of liquidity among companies will be better. Though the procedure came late yet the reduction of listed companies in the official market by 26 companies in one year is a major step towards the right direction though its positive results might be a bit late.
Education-Spending & Outcome
Education is the making of the human, and in economic literature it is often said that the human is the mean and end of development. In other words, development is made by the able human and its ultimate goal is the sustainability and wellbeing of that human. Therefore, the quality of education received by the human and its strong relationship with the labor market is the most important development project pillar. Spending on education is supposed to be an indicator to the seriousness of development project. But that represents half the truth. The feasibility of spending on education is strongly conditioned proportionally with the spending volume and the outcome of the educational system, i.e. upgrading the educational level by increased spending on it.
In Kuwait, estimated education spending in 2017/2018 budget is about KD 3,237 million according to “New Kuwait” Project, or 16% of total public expenditures, or 9.6% of nominal GDP for 2016 as estimated by the Central Bank of Kuwait. This percentage is among the highest spending rates in the world. The figure also represented 74.6% of all public expenditures of Kuwait in 1999/2000 budget. This includes KD 624 million for studying support, internal and external scholarships and students’ allowances. This support is not conditioned by compatibility between the study major and labor market requirements. The figure also includes KD 250 million for construction costs most of which is for a one university building which completion lagged 7 years until now, and witnessed its seventh fire recently.
Education outcome, according to the World Bank Report, is equal to the level of a poor and devastated country like Cambodia. Most graduates register and wait their turn for a government job to join the veiled unemployment system where most of jobs are not related to the study major. Before a deliberate tolerance some teaching is done by holders of fake degrees in all fields. Any development project that tolerates such educational level will yield reverse development, or backwardness because it is a direct and painful hit to the human capital.
According to the statistics of the Public Authority for Civil Information (PACI) as of 31/12/2016, there are slightly more than 135,000 Kuwaitis, both male and female, who hold university degrees or higher degrees, about 10% of the indigenous citizens, which is a very high percentage. Nevertheless, indexes are conclusive for Kuwait’s lagging development. This shows that the national human is neither a means nor an end for development. PACI’s data indicate that the education achievement of about 34% of Kuwaiti is unknown, being illiterate or any educational level, which forms a statistical gap and absence of the human citizen’s significance in the development project.
In brief, it seems that spending on education and its outcomes has become reversed. It also seems that the saying that the citizen is the means and end for the development project is untrue. Instead of governmental and parliamentary attempts to buy the citizen’s loyalty, it would be better to give priority to his/her future which needs some effort to make his/ her skills better to be able to confront repercussions of scarce oil revenues because the current situation, albeit bad, is unsustainable.
According to a report issued by the American EIA on May 15, 2017, total OPEC’s revenues in the first 4 months of this year scored about US$ 175 billion (Expected to reach about US$ 527 billion for the entire year). Those revenues ranged between an average of US$ 1100 million per year for the years 2011, 2012, and 2013. This means that this year average equals 48% of the three mentioned years’ levels. Revenues will not soar up in 2018 and are estimated at US$ 570 billion which remains conditioned by the continued agreement to control production levels among OPEC members and producers outside OPEC. However, the positive impact of controlling production agreement remains obvious, from US$ 433 billion in 2016, and will increase by 22% in 2017 estimates.
It seems a new agreement on controlling production for 9 months is quite close, up to first quarter in 2018. Such intentions contributed to raising the price of Brent oil by 10% in one week. This remains real in the short term, i.e. keeping the price at about US$ 55 per Brent barrel of oil. But the truth for the medium to long terms is that this average price is the maximum to be achieved and without its continuity guaranteed. Therefore, the public finance position in all OPEC states has become critical in the future. No OPEC member achieves balanced budget at this price level. Budgets’ Parity prices will rise higher in the future due to pressures of natural public spending growth and due to starting interests and installments payments of sovereign debts which began to accumulate to pay for deficits in the public finances.
Last week, KSA and later on GCC states concluded gigantic deals worth more than US$ 400 billion, during the American President Trump’s visit to KSA. It is still premature to judge their probable impacts on conditions of their public finance in the future. But the dominance of the military and security nature on them makes us more inclined towards the negative impact.
Controlling public expenditures and diversifying income sources is no longer an option for the regional states. Political, social and economic stability is threatened by the public finance deficit. Failure to confront its exacerbation seriously and rapidly means serious betting on the region’s stability, and all states in it. While some regional states laid down some confrontation visions, Kuwait remained lagging in adopting its vision. It still resorts to the trial and error approach by submitting humble projects only to withdraw them later on while the situation requires a real surgery.
Kuwait Finance House (KFH) Financial Results – First Quarter
2017
Kuwait Finance House (KFH) announced results of its operations for the first quarter of the current year, which indicate it achieved net profit — after tax deductions — by KD 43 million, increased by KD 6 million, or by 16.3% compared with KD 37 million in the same period of 2016. This rise in profit level is due to the rise in total operations income versus a drop in total expenses. Consequently, the bank’s operational profit rose by KD 35.3 million and scored KD 98.7 million compared with KD 63.4 million.
In details, total operational income rose by KD 31.1 million, or by 22.6%, and scored KD 168.6 million compared with KD 137.5 million in the same period of last year. This resulted from the rise in the item of investment income by KD 22.6 million that reached about KD 27.2 million compared with KD 4.6 million. Likewise, other items of operational income rose by KD 9.5 million, and scored KD 136.9 million, compared with KD 127.4 million.
While the item of net gain from foreign currencies dropped by KD 1 million, and reached KD 4.5 million compared with KD 5.5 million.
On the other hand, total operational expenses dropped by KD 4.2 million, or by 5.7%, from KD 74.1 million to KD 69.9 million due to the drop in items of operational expenses. Percentage of total operational expenses to total operational income scored 41.5%, compared with 53.9% in the same period of last year.
Total provisions rose by KD 22.3 million and scored KD 43.4 million compared with KD 21.1 million. The forgoing explains the rise in the net profit margin to 25.8% versus 23.1% in the same period last year.
Total bank assets decreased by KD 54.8 million, or by 0.3%, reached KD 16.445 billion, versus KD 16.499 billion in the end of 2016. But if compared with total assets in the same period of 2016, it will drop by KD 294.9 million, when it scored KD 16.739 billion. Item of cash and balances with banks and financial institutions dropped by KD 142.8 million, or by 9.6%, scored KD 1.352 billion (8.2% of total assets) compared with KD 1.495 billion in the end of 2016 (9.1% of total assets). It also dropped by KD 312.7 million in comparison with the same period of last year when it scored KD 1.665 billion (9.9% of total assets). Item of short-term murabaha dropped by KD 126.1 million, or by 4.4%, scored KD 2.751 billion (16.7% of total assets) vis-à-vis KD 2.877 billion in the end of 2016 (17.4% of total assets). It dropped by KD 327.4 million (18.4% of total assets), compared with KD 3.078 billion in the same period of last year. While item of financing receivables rose by KD 285.5 million, or by 3.5%, and scored KD 8.461 billion (51.5% of total assets) compared to KD 8.176 billion (49.6% of total assets) in the end of 2016. It rose by KD 138.2 million, compared with the same period of last year, when it scored KD 8.323 billion (49.7% of total assets). Percentage of total financing receivables to total depositors’ accounts scored about 77.5% compared with 76.4%.
Figures indicate that the bank’s liabilities (without calculating total equity) rose slightly by KD 5.1 million, or by 0.04%, and scored KD 14.466 billion compared with KD 14.461 billion in the end of 2016. If compared with total liabilities in the same period of last year, it will decrease by KD 268 million, or by 1.8%, when it scored KD 14.734 billion. Percentage of total liabilities to total assets scored 87.97% compared with 88.02%.
Results of analyzing the bank’s financial statements calculated on annual basis indicate that all profitability indexes increased compared with the same period of 2016. The average return of bank assets (ROA) increased to 1% compared with 0.9%. Likewise, the average return on bank capital (ROC) increased to 31.3% compared with 29.6%. The average return on equities relevant to the bank shareholders (ROE) increased to 8.7% versus 7.8%. (EPS) rose to about 6.8 fils compared with 6 fils. (P/E) scored 19.5 times, improved slightly, compared with 20 times, due to the rise in (EPS) by 13% compared with less rise in the market price by about 10.4% compared with March 31, 2016. (P/B) index scored 1.5 times, compared with 1.3 times.
The Weekly Performance of
Boursa Kuwait
The performance of Boursa Kuwait for last week was less active compared to the previous
one, where all indexes showed a decrease, the traded value index, the traded volume index, number of transactions index, and the general index. AlShall Index (value weighted) closed at 381.2 points at the closing of last Thursday, showing a decrease of about 2.6 points or about 0.7% compared with its level last week, while it increased by 18.2 points or about 5% compared with the end of 2016.
The following tables sumarise last week’s performance of Boursa Kuwait.