Global equity markets shed 13.47% in March
GCC equities drop by 17.57%
KReport prepared by KFIC
uwait Finance and Investment Company (KFIC) announced its report for March 2020 which discusses the status of local and international markets.
International Economic Overview:
March 11, 2020, World Health Organization officially described the COVID-19 situation as a pandemic. The month was highlighted by sharp declines in global asset prices. The rout in global equity markets was indicated by the MSCI World index which lost -13.47% during the month.
To counter the economic impact and support markets, the US federal reserve cut interest rate twice in March, to arrive at the target range of 0%-0.25% from a target range of 1.50%-1.75% at the start of the month. The fed also said that it would begin quantitative easing, a stimulus move to inject money directly into the economy through buying bonds. However, the measures were inadequate to counter the bearish trend.
The Dow Jones Industrial Average DJIA dropped by -13.74% MTD, while the S&P 500 decreased by -12.51%. Q1-2020 was the worst performing first quarter in the history of DJIA as it decreased -23.20% QTD. Moreover, the Dow had its fastest 20% drop ever, as it plunged by that amount in just 20 days.
In Europe, France’s CAC 40 decreased the most as it dropped by -17.21% MTD, while Germany’s DAX was the second worst performer and dropped by -16.44%. UK’s FTSE 100 index was no exception and had a drop of -13.81%. European Central Bank (ECB) also tried to help reduce the effects of coronavirus pandemic by announcing a stimulus package of EUR 750bn on March 18th. In Asia, Japan’s Nikkei 225 dropped by -10.53% MTD.
In China, the Shanghai Composite performed relatively better and dropped by -4.51%. In Commodities, oil prices had an even sharper drop compared to equities, as WTI lost -54.43% MTD to close at USD 20.5 bb/l and Brent decreased by -46.86% MTD to close at USD 26.4 bb/l. Oil prices had the worst ever quarterly performance with WTI -65.85% QTD, and Brent -58.88%.
In addition to the pandemic continuing to plunge the demand for oil, the supply side has been under the limelight as OPEC and Russia could not agree on oil production cuts going forward.
As the current quota regime is expected to be lifted in May, Saudi Arabia has vowed to protect its market share by increasing production levels to historic highs, prompting concerns of supply glut and race to secure storage facilities across the globe. Not surprisingly, Gold was the best performer extending gains by +3.95% during the quarter to end 52 week performance at +22.5% GCC Economic News: During March, GCC equities as measured by the MSCI GCC IMI index fell by -17.57% amid the COVID-19 spread and declines in international markets, extending previous losses from oil price declines to end the year down -24.5%. All sectors except Consumer Staples ended the quarter in the red. Materials, Industrials and Financials were the worst performing sectors YTD and dropped by -34.1%, -27.0% and -23.0% respectively.
In Kuwait, All Share Index dropped by -19.4% MTD wiping out any gains made during the year. Telecom was the only gainer YTD while Basic Materials performed the worst.
Similarly, Saudi Arabia’s Tadawul All Share index decreased by -14.72% MTD with all sectors declining except for Consumer and Telecom. Qatar’s QE index had the lowest fall among the GCC markets as it dropped by only -11.04% MTD despite negative performances across all sectors.
In the UAE, Abu Dhabi’s ADSM index decreased by -26.42% QTD mainly led by Banks that declined by -34.2%. Consumer was the best performer with a 46% increase during the period. Dubai’s DFM index had the worst performance in the GCC as the index lost -35.9% QTD. The losses were led by Real Estate sector that lost -43.3% followed by Transport Sector which dropped -39.3%.
In Oman, MSM 30 index lost -13.4% QTD led by declined in Banking. Bahrain’s BSE index ended the quarter with a decrease of -16.1% mainly driven by decline in Banking Sector.
Source: KFIC Research, Reuters, Bloomberg, CNBC, KUNA, IMF, BTEA, EFG