Real estate market liquidity down in October

Individual investors still form largest trading group ... their contribution rising

The latest released data by the Ministry of Justice – Real Estate Registration and Authentications Department – (after excluding the crafts activity and the coastal strip system) indicate a decrease in real estate market liquidity during October 2019 versus September 2019 liquidity says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.

Total value of contracts and agencies traded during October scored KD 223.4 million which was a -32.1% decrease than its counterpart value in September 2019 which was at KD 328.9 million, also lower by -27.1% when compared with October 2018 liquidity that totalled KD 306.5 million.

Trading during October 2019 was distributed between KD 210.5 million to contracts and about KD 12.9 million to agencies. Number of real estate deals in this month were 441 deals, of which 416 contracts and 25 agencies. The highest share in real estate deals went to Al Ahmadi Governorate by 137 deals representing about 31.1% of the total number of real estate deals. Mubarak Al Kabeer Governorate came second with 105 deals representing 23.8%. While the lowest share went to Al Jahra Governorate by 28 deals, representing about 6.3% of the total. Value of private residential activity scored KD 112.4 million, declining by -23.2% compared with KD 146.5 million in September 2019. While its contribution percentage increased to 50.3% of the total real estate trading versus 44.5% in September 2019.

The monthly average value for private residence trading in the last 12 months scored KD 128.6 million. This means that October trading value was lower by -12.6% than the average. The number of deals for this activity was at 335 deals versus 423 deals in September 2019. Accordingly, the average value of private residence activity deal registered at KD 336 thousand versus KD 346 thousand in September 2019, a decrease by -3.1%. Value of investment housing activity scored KD 110.6 million, higher by 7.2% from KD 103.1 million in September 2019. Its contribution to total liquidity increased to 49.5% versus 31.4% in September 2019. Monthly trading average value of investment housing activity during 12 months scored KD 119.4 million.

This means that trading value during October 2019 was lower by -7.4% compared with the last 12 months’ average. Moreover, its deals decreased to 98 deals compared with 127 deals in September 2019. Therefore, the average value per deal for investment housing scored KD 1.1 million versus KD 812 thousand in September 2019, representing an increase by 38.9%. Commercial activity trading value decreased greatly to KD 375 thousand or by -99.5%, compared with KD 75.9 million in September 2019.

Its percentage out of total real estate trading value declined to 0.2% in October versus 23.1% in September 2019. Average value of commercial activity trading in 12 months scored about KD 54.5 million. This means that total trading value in October was lower by -99.3% than the last 12 months’ average. However, its deals scored 8 deals compared with 38 for September 2019.

The average value per deal for October 2019 scored KD 47 thousand versus KD 2 million average for September 2019, a -97.7% decrease. When comparing total October 2019 trading with October 2018, we note that real estate markets liquidity decreased from KD 306.5 million to KD 223.4 million, a -27.1% decline as mentioned previously.

The decline included the commercial activity by -99.2% and private residence activity by -24.7%, while investment housing activity rose by 6.2% compared to their levels in October 2018. If we compare total real estate trading value since the beginning of the current year until October 2019 with its 2018 counterpart, we note an increase in total real estate market liquidity from KD 2.815 billion to KD 2.823 billion, a 0.3% growth. If we assume that market liquidity will continue at the same level for the remainder of the year (2 months), market trading value would amount to KD 3.388 billion, which is KD 243.7 million lower than the total for last year, representing a -6.7% decline below 2018 level which scored KD 3.631 billion.

Trading Features at Boursa Kuwait – October 2019

Kuwait Clearing Company issued its report regarding “Trading Volume according to Nationality and Category” for the period from 01/01/2019 to 31/10/2019 which is published on the official website of Boursa Kuwait. The report indicated that individuals still form the largest trading group and their contribution is rising in terms of selling and purchasing shares.

They acquired 44.7% of total value of sold shares (36.6% for the first 10 months of 2018) and 40.9% of total value of purchased shares (36.7% for the first 10 months of 2018). Individual investors sold shares in the amount of KD 2.991 billion and purchased shares in the amount of KD 2.740 billion with a net trading of selling, by KD 250.872 million.

The second large contributor to market liquidity is the institutions and companies sector and their purchases declined alongside their sold shares. It acquired 30.3% of total value of purchased shares (34.1% for the same period of 2018) and 21.8% of total value of sold shares (28% for the same period of 2018). The sector purchased shares worth KD 2.031 billion and sold shares worth KD 1.459 billion, becoming the only sector with net trading of buying by KD 572.551 million.

The third contributor is the clients’ accounts (portfolios) and their contribution is rising, which captured 26.3% of total value of sold shares (23.2% for the same period of 2018) and 22.5% of total value of purchased shares (20.8% for the same period of 2018).

This sector sold shares worth KD 1.762 billion and purchased shares worth KD 1.505 billion, with a net trading balance of most sold shares by KD 256.523 million. The last contributor to liquidity is the investment funds sector and their contribution is declining, which acquired 7.2% of total value of sold shares (12.2% for the same period of 2018) and 6.2% of total value of purchased shares (8.3% for the same period 2018). The sector sold shares worth KD 483.543 million and purchased shares worth KD 418.387 million, with a net trading of selling by KD 65.156 million.

Boursa Kuwait still continues to be a local Boursa with Kuwaiti traders forming the largest trading group. They sold shares worth KD 5.651 billion capturing 84.4% of total sold shares (80.9% for the same period of 2018), and purchased shares worth KD 5.143 billion acquiring 76.8% of total value of purchased shares (75.5% for the same period of 2018). As such, their net trading balance was – most selling – by KD 508.355 million. Percentage share of other investors, out of the total purchased stocks value scored 18.5% (19.4% for the same period of 2018).

Purchasing stocks worth KD 1.242 billion and sold shares worth KD 716.925 million, 10.7% of total sold shares (13.3% for the same period of 2018); thus their net trading value was – the only purchasing – by KD 524.820 million.

This means that the other foreign investors’ confidence in the local Boursa is increasing which indicates an increased appetite from outside the GCC region after the recent reforms. GCC Investors’ share out of total value of sold shares scored 4.9% (5.8% for the same period of 2018) worth KD 327.351 million, while value of their purchased shares scored 4.6% (5.1% in the same period of 2018), worth KD 310.886 million. Their net trading was selling by KD 16.465 million. Relative distribution among nationalities changed from its predecessor and was at 80.6% for Kuwaitis, 14.6% for traders from other nationalities and 4.8% for GCC traders, compared with 78.2%, 16.3% and 5.5% for Kuwaitis, other nationalities and GCC traders respectively, for the same period in 2018.

This means Boursa Kuwait remained local with the major share for the local investors and their share is increasing. Still, turnout from traders from outside the GCC region than their GCC counterparts, and the majority of the trading is still for individuals. Number of active accounts between the end of December 2018 and the end of October 2019 rose by 10.1%, compared with a decline of -23.2% between end of December 2017 and end of October 2018. Number of active trading accounts in the end of October 2019 was at 16,022 or 4.08% of total accounts, compared to 15,857 accounts in the end of September 2019, i.e. 4.04% of total accounts for the same month, a rise by 1% during October 2019.

Financial and Monetary Statistics –

September 2019

In its monthly monetary statistical bulletin for the month of September 2019, as published on its website, the Central Bank of Kuwait (CBK) stated that the balance of total public debt instruments – bonds and Tawarruq operations are included since April 2016 – declined by KD 600 million by June 2019 to become KD 2.372 billion in the end of September 2019, 5.6% of the nominal GDP for 2018 in the amount of KD 42.475 billion. The average interest rate on public debt instruments scored 3.250% for one year, 3.375% for 2 years, 3.375% for 3 years, 3.500% for 5 years, 3.625% for 7 years and 3.875% for 10 years. Local banks capture 100% of total public debt tools (100% in the end of June 2019).

The CBK bulletin states that total credit facilities for residents offered by local banks in the end of September 2019 was at nearly KD 38.093 billion, about 54.5% of total local banks’ assets, rising by KD 211.3 million or a quarterly growth rate of 0.56%, over its level in the end of June 2019. Total personal facilities were at KD 16.358 billion or 42.9% of total credit facilities (KD 15.976 billion in the end of June 2019), a quarterly growth rate by 2.4%. Total value of installed loans there from scored about KD 11.871 billion, or 72.6% of the total value of personal facilities.

An amount of KD 2.765 billion or 16.9% of the total personal facilities, went for the purchase of securities. Value of consumer loans amounted to KD 1.331 billion. Credit facilities for the real estate sector amounted to KD 8.575 billion or 22.5% of the total (KD 8.615 billion in the end of June 2019), approximately two-thirds of the credit facilities went to personal and real estate facilities. The trade sector acquired KD 3.383 billion or 8.9% (KD 3.430 billion in the end of June 2019), nearly KD 2.067 billion or 5.4% went to the construction sector (KD 2.008 billion in the end of June 2019), and KD 2.008 billion went to the industry sector or 5.3% (KD 1.997 billion in the end of June 2019), and KD 1.083 billion or 2.8% went to the financial institutions – other than banks – (KD 1.159 billion in the end of June 2019). The bulletin also indicates that total deposits at local banks scored KD 43.414 billion representing 62.1% of total local banks liabilities, a decline by KD 610.3 million below its amount in the end of June 2019, a quarterly decline rate by -1.4%, due to the decrease of private sector deposits by KD 644 million. About KD 36.471 billion – 84% – belongs to clients of the private sector in its comprehensive definition including major institutions like the – Public Institution for Social Securities – does not include the government.

About KD 33.768 billion were in Kuwaiti Dinars (KD 34.588 billion in the end of June 2019), 92.6% went to private sector clients and the equivalent of KD 2.703 billion was in foreign currency to private sector clients. As for the average interest rate on customer time deposits, both in the Kuwaiti Dinar and the US Dollar versus the end of June 2019, the bulletin states that it is still in favor of the Kuwaiti Dinar in the end of the two periods, as a result of the US Federal Reserve reducing the base interest rate on the US Dollar by 0.50 percentage point during the 3rd quarter of the current year.

It registered at 1.015 points for 1-month deposits, 0.968 point for 3-month, 0.998 point for 6-month deposits, and 1.019 points for 12-month deposits. This difference at the end of June 2019 was 0.764 point for 1-month deposits, 0.727 point for 3-month deposits, 0.738 point for 6-month deposits, and 0.742 point for 12-month deposits. The monthly average exchange rate for the Kuwaiti Dinar against the US Dollar in September 2019 scored about 303.760 Kuwaiti Fils for each US Dollar, increasing slightly by 0.09%, compared with the monthly average for June 2019 when it was 303.494 Kuwaiti Fils per one US Dollar.

Commercial Bank of Kuwait (CBK) Financial Results – 30 September 2019

The Commercial Bank of Kuwait (CBK) announced results of its operations for the first nine months of the current year, which indicate that the bank’s achieved net profit (after tax deductions) of KD 16.67 million compared with KD 15.25 million for the same of period 2018, reflecting a rise by KD 1.42 million or by 9.4%. This increase in net profits is due to the absolute rise in total operating income by a higher value than the rise in total operating expenses.

Therefore, the bank achieved an operating profit (before provisions deduction) by KD 85 million, rising by KD 3.5 million or by 4.3% versus KD 81.5 million in the same period of last year. In details, total operating income increased by KD 8.09 million or by 7.1%, and scored KD 122.24 million compared with KD 114.16 million for the same period of 2018.

This resulted from the increase in item of net interest income by KD 3.54 million, reaching KD 73.66 million compared with KD 70.12 million. Also, items of fees & commissions and other operating income rose by a total of KD 3.94 million. On the other hand, total operating expenses increased by a lower value than the increase in total operating income, i.e. by KD 4.59 million or by 14.1%, reaching KD 37.26 million compared with KD 32.67 million for the same period of 2018, as a result of the increase in the item of staff expenses by KD 3.92 million and item of depreciation & amortization by KD 2.52 million, while item of general & administrative expenses decreased by KD 1.85 million.

Total provisions rose by KD 2.03 million or by 3.1%, and scored KD 67.68 million compared with KD 65.65 million. Therefore, the net profit margin dropped to 13.4% compared with 14.5% for the same period 2018. Total bank’s assets scored KD 4.720 billion indicating an increase by 5.6% or by KD 252.3 million, compared with KD 4.468 billion in the end of 2018. Total assets increased by 11.6% or by KD 492.3 million when compared with total assets in the same period of 2018, that scored KD 4.228 billion.

Item of dues from banks and other financial institutions increased by KD 358.9 million or by 96.9%, and scored KD 729.3 million (15.5% of total assets) versus KD 370.4 million (8.3% of total assets) in the end of 2018. It also rose by 110.2% or by KD 382.4 million, when it is compared with the same period of 2018 in which it scored KD 346.9 million (8.2% of total assets). Item of loans and advances to customers rose by KD 3.9 million or by 0.2%, scoring KD 2.257 billion (47.8% of total assets) compared with KD 2.253 billion (50.4% of total assets) in the end of 2018. It rose by 2.7% or by KD 58.8 million if compared with the same period of 2018, when it scored KD 2.198 billion (52% of total assets).

Percentage of total loans and advances to total deposits scored 60.5% compared with 66% end of September 2018. Figures indicate that the bank’s liabilities (excluding total equity) increased by KD 265.4 million or by 7.1%, scoring KD 4.003 billion compared with KD 3.738 billion in the end of 2018. It increased by KD 460.2 million or by 13% if compared with the total in the same period of last year when it was at KD 3.543 billion. Percentage of total liabilities to total assets scored 84.8% compared with 83.8%. Results of analyzing of the bank’s financial statements calculated on annual basis, indicate that most bank’s profitability ratios showed a positive performance compared with the same period of 2018.

The return on average equities relevant to bank shareholders (ROE) rose slightly to 3.1% compared with 3%. The return on average assets (ROA) also increased slightly to 0.48% versus 0.47%. Meanwhile, the return on average capital (ROC) dropped slightly to 11.7% versus 11.8%. Earnings per share (EPS) increased to 8.4 Fils versus 7.7 Fils for the same period of 2018. (P/E) scored 44.6 times versus 49.2 times (improved), due to the rise in EPS by 9.1% against a decline in the share market price by 1% compared to their levels on 30 September 2018. (P/B) scored 1.4 times compared with 1.1 times.

The Weekly Performance of

Boursa Kuwait

The performance of Boursa Kuwait for last week was more active, where the traded value, traded volume, number of transactions and the general index (AlShall Index) increased. Al-Shall Index (value weighted) closed at 500.7 points as of last Thursday, showing an increase by 8.4 points or by 1.7% compared with its level last week. While it remained higher by 71.7 points or by 16.7% compared with the end of 2018.