Markaz’s Board OKs to distribute cash dividends of 5% per share
KUWAIT CITY, March 22: Kuwait Financial Centre “Markaz” held its ordinary General Assembly meeting on Wednesday, 22 March 2023, with a 67.86% attendance. The assembly approved all items of the agenda, including the Board of Directors’ recommendation to distribute cash dividends of 5% per nominal value of the share or 5 fils per share.
Markaz recorded Total Revenues of KD 18.8 million, as compared to KD 30.64 million in 2021. The Company delivered a Net Profit attributable to shareholders of KD 2.86 million, as compared to KD 14.99 million in 2021, and Earnings Per Share of 6 Fils for the year ended 31 December 2022. Markaz’s Assets under Management (AUM) grew by 10.8% to KD 1.15 billion as of December 31, 2022.
Commenting on the results, Markaz’s Chairman, Mr. Diraar Yusuf Alghanim said: “The year 2022 witnessed major events and various challenges that impacted the global markets. These include the Russian war on Ukraine, the tightening of monetary policies by central banks through raising interest rates to curb inflation levels. As a result, these challenges took a toll on the recovery achieved by the global markets in 2021, as most global indices declined.”
Alghanim pointed out: “Despite the economic challenges witnessed in the global markets, Markaz managed to achieve positive results in 2022, supported by the capabilities of its teams in finding opportunities across different markets and sectors in line with the dynamic changes. Further reinforcing the Company’s position in the market, Markaz received nine prestigious award recognitions in 2022 across its various business disciplines, including investment banking, asset management, wealth management, digital solutions, diversity and inclusion, and CSR. These awards were presented by Global Finance, EMEA Finance, Global Investor, Euromoney, and WealthBriefing, as a testament to Markaz’s successful approach towards building long-term client relationships and delivering quality services across all offerings.”
Business Strategy
Alghanim stated: “During the year 2022, Markaz rolled out the new Company strategy, which was revised and developed in 2021 in collaboration with an international consulting firm, based on the latest market trends. The strategic pillars put forth entail product launches, wealth management and distribution, and the development of the operational model, in an effort to attain organizational growth, elevate efficiency levels and further reinforce the digital transformation journey, while achieving organic growth.”
He added: “Markaz enjoys decades of experience in managing client assets during uncertain and volatile times. In this rapidly evolving landscape, the Company remained committed to maintaining its disciplined approach towards asset selection and risk management, continuing to strengthen product offerings and improve overall asset management services. Moreover, various steps towards fortifying the automated anti-money laundering transaction monitoring systems have been taken, in line with the instructions of the Capital Markets Authority, as part of the Company’s vision to enhance compliance systems.”
Outlook
“The global economy is witnessing a period of slow growth and persistent inflation, leading to raising concerns of deflation and economic recession. To counter these repercussions, central banks worldwide are expected to ease the hike of interest rates over the forthcoming year, and the US Federal Reserve is likely to curb its rate increases as well. In addition, the European Central Bank is predicted to increase rates by 3.25% in the first quarter of 2023,
before beginning to reduce rates again in early 2024. The economic recovery in Asia will positively affect the balance of the global economy and limit the slowdown in global economic growth. Oil prices are expected to remain robust in 2023, with forecasts averaging $80 per barrel, due to limited supply. This will continue to positively affect financial budgets in the Gulf states in general and Kuwait in specific. Market performance in 2023 will depend on global economic conditions and their impact on the banking sector, in addition to governments’ implementation of financial reforms and trade exchange,” Alghanim commented.
“We foresee a promising year ahead for Markaz, by identifying favorable investment opportunities and fulfilling our clients’ investment goals. We expect to benefit from the current interest rate environment through fixedincome investments, in an effort to generate current returns for our clients. Our Investment Banking teams are also expanding their business development plans to participate in IPO deals and manage listings and bond issues in 2023. Despite high interest rates, we expect the real estate sector to benefit from the demographic growth and economic transformation we see today across the region.” Alghanim concluded.
Mr. Ali Hassan. Khalil, Markaz CEO also commented saying: “The past year has been challenging for the financial services industry, caused by extensive volatility and economic uncertainty in the global economy. Despite these challenges, Markaz has achieved record management fees and positive investment returns. These results are stem from our belief that every market condition offers unique investment opportunities. For nearly 50 years, we have worked at identifying such opportunities and creating investment products and financial solutions around them that best serve our clients. This mindset allowed us to maintain our leading position in the market and grow our client base.”
Strategic Initiatives
Khalil Highlighted: “Our resilient performance and the numerous awards received reflect our evolving business model. We started 2022 with the recently updated growth strategy for the post-Covid period. All our teams were fully engaged in accelerating its implementation and aligned to incorporate our strategic drivers and achieve the targeted AUM and growth in fees.”
“Our primary strategic driver is to enhance our investment offerings by launching new products and solutions catering to a younger and exposed investor base, improve and scale existing investment programs, and expand investment banking services. We have always been pioneers and innovated new investment products in Kuwait.
The year 2022 was no different; we obtained the Capital Markets Authority’s initial approval to launch the first factor-investing fund, GCC Momentum Fund, in addition to launching the margin lending activities and setting the stage to launch “securities lending” through our Forsa fund. Our investment managers scaled our existing programs, such as the international real estate development program, and repositioned our flagship real estate and equity funds to ensure the longterm sustainability of returns. Our investment banking teams strengthened their position as a partner of choice for local and regional corporate clients and family offices through their commitment to the highest quality and timely execution, reflected in our high client satisfaction and numerous awards.” He added.
Khalil stated: “A central pillar of our strategy is to enhance our wealth management offerings and distribution capabilities, and reinforce Markaz’s position as a reliable wealth advisor in Kuwait and the GCC. Towards that, we took significant steps towards reestablishing a private equity program by onboarding best-in-class managers and products. We are planning to team up with international advisors to offer our clients international domiciliation of their accounts with leading international banks. This will enable our high networth and affluent clients to establish investment trusts, multi-generational endowments, and access products globally.”
“We place a high priority on enhancing our customer journey through digitization to attain a leading position as a market leader in digital offerings. We continuously seek to take the necessary steps to optimize our operating model through technology to remain agile and efficient.”
Solid performance across sectors underpinned by outstanding operational capabilities Equities
The GCC markets were more resilient and performed better than other emerging markets. The rise in interest rates, inflation, and risk of recession worldwide was offset by higher oil prices and higher economic growth prospects for the GCC.
Our equities team actively managed their funds in 2022 and launched new products to benefit from the market conditions. During the year, our funds registered positive returns ranging from 7.4% for Forsa Fund to 1.6% for Markaz Islamic Fund (MIF), substantially outperforming their respective benchmarks. Furthermore, our portfolio managers have developed actively managed strategies such as “opportunistic portfolios” that registered an 8% return (compared with -5% for the GCC index). The result aligns with flexible investment guidelines to generate positive returns in all market conditions.
Fixed Income
As with the equity markets, the fixedincome markets globally witnessed significant drawdowns during the year, a challenge to conventional 60/40 portfolios. However, fixed-income will benefit in 2023 from the higher interest rate environment.
With over ten years of consistent performance, our Markaz Fixed Income Fund (MFIF), a private placement fund, achieved solid relative performance. Our portfolio managers will continue to identify timely opportunities within the asset class and establish tailor-made portfolios for our investors to capitalize on, offering them steady and current income.
International Real Estate
Real Estate markets internationally experienced significant headwinds and registered a decline in values and transaction volume across all sectors. Yet, our strategies proved their resilience in both US and Europe. In 2022, we successfully exited six investments. Our international real estate team remains optimistic regarding the fundamentals in the following years, and they invested in six new projects in the USA in 2022. These represent selective residential, senior housing, and logistic investments. In addition, the team is currently targeting real estate debt structures, which offer a timely opportunity for better risk-adjusted returns than equity.
MENA Real Estate
The GCC real estate markets achieved strong performances in 2022, continuing the positive momentum that started in 2021. This strong performance is driven by the increase in oil prices, a promising regional growth story, and the various economic growth initiatives across the GCC.
The occupancy in Markaz Real Estate Fund (MREF) increased from 77.4% in January 2022 to 92.5% in December 2022. The fund registered a total return of 7.4% for 2022 due to the improved operational performance. In 2023, the MENA Real Estate team will focus on growing its flagship funds and launching new products that benefit from the regional growth story. The team is mainly looking at development opportunities within the logistics sector in the KSA, “build-operate-transfer” contract opportunities in Kuwait, and income-generating logistics, residential and commercial assets in the GCC.
Investment Banking Services
We expanded our reach during 2022 through proactive business development efforts that resulted in successfully onboarding new mandates and clients through our Advisory team. In addition, the Capital Markets team executed several ECM and DCM transactions, including lead management for National Industries Group’s capital increase and bond issuances and offering IPO readiness assessments for companies.