GCC markets positive during year as Kuwait outperforms

Global stocks record best performance in 2019 since global financial crisis

TKAMCO Research

he year 2019 proved to be a recovery year for most major global financial markets after a majority of these markets declined during 2018. Gains during the year came despite several warnings from various international agencies regarding a slowdown in economic growth rates. Most of these estimates were based on the decline in international trade due to the unresolved trade war between two of the world’s largest trading partners-US and China. Nevertheless, in what was termed as a part of the ’Phase one’ deal, the two countries made some progress on a trade deal during mid-December that provided a big boost to the equity markets. Also, the year 2020 started with more concrete steps towards a trade deal with the US President announcing Jan 15, 2020 as the date of signing of the Phase One Trade Deal between the two countries followed by a Phase Two deal in the coming months.

Equity market performance during the year showed corporate optimism that hoped for an economic recovery during the year. The US markets touched record highs during the year backed by technology stocks while on the other hand the consumer retail segment suffered amid efficiency improvement measures. European stock markets also gained during the year with Greece, Russia and Italy being the best performing markets during the year with returns of 43%, 29% and 28%, respectively. The larger markets in the region also saw healthy gains with France recording a gain of 26.4% followed by Germany and UK with gains of 25.5% and 12.1%, respectively. UK’s stock market was lagging behind its European peers for the most part of the year but post the election results in December ‘19, the market reported gains that pushed it to double digit territory. In the Emerging Market space, China was one of the best performing equity markets with a gain of 22.3% while India’s SENSEX recorded a surge of 14.4%. The overall MSCI Emerging Market index was up by 15.4% during the year.

In terms of other asset classes, the broader global commodity gauge was up 17.6%, with crude oil being the best performer with a gain of more than 23%, whereas natural gas was one of the few asset types that declined during the year by more than 25%. Prices of gold gained during the year as its safe haven status got strengthened while the greenback weakened led by the US-China trade talks. Both the Global High Yield and the Investment grade bond indices saw gains during the year at 13.4% and 6.8%, respectively.

GCC Market Performance - 2019

After ending 2018 as the best performing market, GCC equity markets underperformed global peers during 2019, reporting significantly lower gains during the year. The MSCI GCC index reported a gain of 5.9% during the year as geopolitical issues and subdued oil prices as compared to historical levels, affected investor sentiments towards regional markets. Volatility in the GCC was one of the highest on record, and was in line with the US markets with both recording 37 days when the markets moved more than 1% during the year as compared to 32 days and 64 days for the GCC and US equity market in 2018, respectively. In addition, gains for the individual markets also varied across the GCC, with Kuwait reporting gains of 23.7% during the year, while on the other hand, Oman reported a decline of 7.9%. Last years best performing market, Qatar, reported marginal gains of 1.2% while 2018’s worst performer, Dubai, reported a gain this year of 9.3%. Saudi Arabia was one of the most volatile markets during the year with YTD gains reaching around 20% during the first half of the year being wiped off by 9M-19 post the MSCI inclusion, as well as due to the attacks on Aramco’s oil facilities during September ‘19. Nevertheless, the Kingdom reported gains during the last quarter and closed the year with a gain of 7.2%.

Market performance during the year was once again swayed by regional geopolitics in addition to oil price movement while changes in international markets had minimal impact on the GCC, as gains in the international market were significantly more than the GCC markets. Lack of catalysts was also one of the primarily reasons for the subdued performance of most major markets in the GCC. Kuwait was the only market that benefited from the MSCI upgrade announcement, whereas Saudi Arabia’s gains during December ‘19 came primarily after the listing of Aramco. On the other hand, international events like the US China trade war affected prospects of stronger economic growth across the region denting investor sentiments.

In terms of sector performance, the Food Beverage & Tobacco sector posted the biggest gain during the year, primarily on the back of multifold gains in the shares of Abu Dhabi-listed IHC further supported by gain in shares of Saudi Arabia’s Sadafco. The Utilities sector also witnessed gains of more than 25% solely on the back of gain in shares of Saudi-listed utilities giants Saudi Electricity and National Gas and Industrialization Co. Meanwhile, Banking sector was one of the strongest performing large cap sectors in the GCC with gains of almost 20%. Bank’s performance was positive for a majority of the markets with 50 GCC banks seeing their stocks gain during the year while shares of 14 banks receded. In terms of trading activity, value traded on GCC stock exchanges gained 5.5% to reach USD 310 Bn in 2019 as compared to USD 294 Bn during 2018. Kuwait and Abu Dhabi witnessed significantly higher trading activity during the year while Dubai, Bahrain and Oman recorded declines.

Boursa Kuwait

Kuwait’s benchmark index recorded positive performance for the fourth consecutive year with gains across most major indices and in all the market segments. The gains were primarily on the back of talks of MSCI upgrading Kuwait to Emerging Market which was announced during December ‘19. The Premier Market index was the best performing index during the year with gains of 32.4% backed by positive performance in 14 out of the 19 constituents in the index. A majority of the stocks that are expected to be included in the MSCI’s Emerging Market index are constituents of the Premier Market index which led to heavy buying during the year. These gains helped offset the muted gain for the main index at 3.6% resulting in 23.7% gain for the All Share Index. The year saw Kuwait’s total market cap gain KWD 7.4 Bn to reach KWD 36.3 Bn.

The sector performance chart for 2019 showed gains predominantly came on the back of large cap sectors including Banks and Telecom which together accounted for 70% of the total stock exchange market cap. The Banking index topped the sector performance chart for the year with a gain of 35.7% followed by the Telecom index with a gain of 25.8%. On the decliner’s side, the Technology Index saw the steepest decline of 34.4% primarily on the back of fall in shares of ASC. The Basic Materials index also declined by almost 22% led by decline in shares of three out of four stocks in the sector. In the Banking sector, shares of 9 out of 10 Kuwaiti banks saw gains during the year with Al Ahli Bank of Kuwait being the only local back which saw its shares decline. KFH was the biggest gainer in the sector with its shares up by 46% during the year followed by 34.7% gains for NBK. The two banks account for almost 60% of the banking sector market cap in Kuwait. In the Telecom sector, shares of Zain were up by 33.6% during the year further supported by 16% gain in shares of Ooredoo Kuwait that more than offset the decline in shares of AAN Digital Services and STC Kuwait.

Trading activity on the exchange almost doubled during the year primarily on the back of buying led by positive sentiments surrounding the MSCI decision. Total value traded was up 92% to reach KWD 7.9 Bn in 2019 as compared to KWD 4.1 Bn during the previous year. Volume traded was also up by 82% during the year at 39 Bn shares as compared to 21.4 Bn shares during 2018. Banks once again dominated trading activity during the year with KFH topping the yearly value traded chart with KWD 1.3 Bn in trades followed by NBK at KWD 1.1 Bn in trades. AUB Bahrain and Gulf Bank were next on the chart with trades of KWD 810 Mn and KWD 709 Mn during the year, respectively. The top five stocks by value traded accounted for 56% of the value traded during the year. In terms of yearly volume. AUB Bahrain topped with 3.1 Bn shares traded during the year followed by Aayan Leasing and Gulf bank with 2.8 Bn and 2.4 Bn shares traded during the year, respectively.

Saudi Arabia (Tadawul)

The Saudi Stock Exchange continued to witness steep volatility during 2019, following the trend seen in the previous year. The benchmark reached a YTD-19 gain of almost 20% during May ‘19 but geopolitical events and the sell-off after the inclusion in the MSCI index wiped off most of the gains by the close of the year. Nevertheless, the listing of Aramco helped push investor sentiments towards the close of the year with gains of 1.5% in November ‘19 followed by 6.7% gains in December ‘19 resulting in a full year gain of 7.2% for TASI. This was also the fourth consecutive year of gains for the benchmark. The listing of Aramco also pushed the exchange’s market cap multifold from SAR 1.9 Trillion in 2018 to SAR 9.0 Trillion at the end of 2019. The company raised around USD 25.6 Bn in the IPO, according to the initial announcement. The latest update on Aramco showed that the company raised a total of USD 29.4 Bn after the company exercised the green shoe option and sold an additional 450 Mn shares to meet investor demand. This overallotment of shares will take the floated shares of the company from the previously announced 1.5% to 1.7%.

Top gainers during the year included Yamamah Saudi Cement Co with gain of 103% followed by Aldrees Petroleum & Transport Co. and Qassim Cement Co with gains of 102.7% and 96.7%, respectively. On the decliners side, Saudi Enaya topped with a decline of 42.6% followed by Al Alamiya for Cooperative Insurance and Al Sorayai Trading with declines of 41.8% and 39.2%, respectively. In terms of sector performance, gains were relatively well spread across sectors with Consumer Services and Utilities topping the chart with yearly gains of 34% and 31%, respectively. The Transportation and Telecom sectors followed with yearly gains of 26.4% and 19.7%, respectively, whereas the Banking index posted a gain of 12.4%. In the Consumer Services sector only two out of the 12 stocks reported decline while a majority of the stocks recorded double digit gains during the year. In the Utilities sector, Saudi Electricity and National Gas & Industrialization recorded gains of 33.6% and 10.4% during the year that pushed the sector index as the second best performing in the market. In the Banking sector, all the banks in the Kingdom recorded gains during the year. Arab National Bank topped the gains in the sector with a surge of 28.8% during the year followed by Bank Al Bilad and Riyad Bank with gains of 23.4% and 21.1%, respectively. NCB was the smallest gainer in the banking sector during the year with a gain of 2.9%. Telcos also recorded strong gains during the year with shares of Etisalat and Zain KSA gaining 51% and 42%, respectively, while shares of STC climbed relatively modestly by 11%. The Energy index closely followed the Banking index with a gain of 12.2% after all the stocks in the index recorded gains during the year.

Among large cap sector decliners, the Materials index recorded a marginal decline of 1.6% during the year. The decline came primarily on the back of decline in large-cap names in the sector including shares of SABIC which declined by 19% and Saudi Kayan with a decline of 15.9%. Nevertheless, the number of gainers dominated in the sector and partially offset the overall decline. Cement stocks reported largely positive performance during the year as almost all the cement stocks reported double digit gains.

In terms of trading activity, value traded on the exchange saw marginal gain of 1.1% to reach SAR 880 Bn while volumes declined 11.8% to reach 33.3 Bn shares. Al Rajhi Bank topped the value traded chart with SAR 109 Bn traded shares during the year.

Abu Dhabi Securities Exchange

The ADX index witnessed moderate gains in 2019, after featuring amongst the best performing GCC indices in 2018. The index reached 5075.77 points and was up 3.3% y-o-y at the end of December ‘19. Sectoral performance was broadly split evenly between gainers and decliners. Consumer Staples was the best performing index in 2019, almost doubling (+99.2%), driven singlehandedly by a 6.3X jump in the share price of International Holdings Company. Real Estate was the next biggest gainer on the ADX, as the sectoral index gained by 29.8% in 2019, driven by Aldar, as its share price gained by 56% during the same period, from the announced freehold law, and the government projects bagged by the company. Banks also gained by 5.5% at the end of 2019, as ADIB and FAB more than doubled. On the decliners side, the Investment & Financial Services index was the worst performing sectoral index in 2019, as it plunged by over 51% y-o-y, as Waha Capital (-50%) was the main laggard in the index. Industrials names also fell by 21.4% in 2019, as Gulf Pharmaceutical Industries declined by 49.9% over the same period. For December ‘19, the ADX was marginally up by 0.9% m-om, but most sectoral indices were up for the month. Consumer Staples was the best performing sectoral index in December ‘19, gaining by 7.6% m-o-m, as International Holdings Company was up 9.5% m-o-m, while Agthia Group was up 2.9% m-o-m. Services and Energy indices followed with gains of 7.4% and 3.8% respectively m-om. Investment & Financial Services (-0.3%) and Real Estate (-0.2%) were the only sectors to close in the red m-o-m.

Trading activity on the exchange was mixed y-o-y in 2019, as volumes traded receded by 3.6% to 12.5 Bn shares. Value traded improved by 40.1% mo-m to reach AED 51.6 Bn during the year. In terms of most actively traded stocks in 2019, FAB led all stocks in terms of value traded, with AED 21.0 Bn worth of shares traded during the year. ADCB and Etisalat followed as AED 7.9 Bn and AED 5.5 Bn worth of shares were traded respectively. Aldar led the most active stocks list in terms of volumes traded, as 2.35 Bn shares were traded. Dana Gas and FAB followed with 2.01 Bn and 1.94 Bn shares traded.

Dubai Financial Market

The DFM index on the other hand, featured amongst the top three performers in the GCC markets for 2019, after

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