24 July 2011
KUWAIT: The Kuwaiti bourse witnessed a turbulent week with various events causing the market to fluctuate. The first two sessions of the week were dramatic as the market indices dropped to levels not seen in long time. The diminishing performance of the market followed a statement from the Governor of the Central Bank of Kuwait (CBK), Sheikh Salem Abdul-Aziz Al-Sabah saying that Kuwait is witnessing imbalances in its economy which require corrections.
He stated that this could lead to a lot of risks at various levels. The negative statement fueled the pessimistic feeling between investors who rushed to cash out of the market. Also the arising financial crisis in the US and euro-zone further damped the sentiments. However, later on during the week traders got some boost in sentiments following the announcement of the newly formed regulator Capital Markets Authority's (CMA) decision to defer the implementation of new rules by six months.
CMA has given investment funds until March 12, 2012 to sort out their ownership in financial securities. According to the CMA bylaws, which came into effect in March 2011 but still not fully implemented, an investment fund cannot own more than ten percent in a single security. The index managed to rebound from its low levels recording gains for three consecutive days following the announcement, but remained below last week's closing level.
Kuwaiti Stock Exchange (KSE) experienced a huge drop reaching its lowest levels since July 6, 2010 on Monday, July 18, as measured by market weighted, Global General Index. The index lost 4.23 percent from its value during the first two trading sessions of the week. However, it bounced back regaining half of its losses but remained in the negative territory for the week. It closed lower by 1.96 percent at 187.14 points, escalating its year-to-date loss to 16.28 percent.
KSE price index performance was more dramatic as it reached levels not seen since 2004 on Monday after crossing below 6,000 point level for two days before adding new gains. The index ended the week shedding 1.47 percent (90.90 points) from its value and closed at 6,077.9 points (a 12.62 percent decline on a year-to-date basis). Market Capitalization declined by KD611.4mn during the week as it reached KD30.59bn. Market breadth was notably tilted to the losers side with 88 stocks closing at lower prices against 19 stocks advancing, out of 130 shares traded. Trading activity was much higher as investors' mood swung between selling and buying on developed news.
Moreover, the flow of 2Q2011 corporate results played a major role in determining investors decisions. Total weekly volume rose by 83.88 percent to 592.38mn shares changing hands at a total traded value of KD117.95mn (87.68 percent increase compared to the previous week). The Real Estate Sector was the most traded in terms of volume, accounting for 28.05 percent (166.15mn shares) of the total market traded shares.
Intensive trading was seen on Abyaar Real Estate Development Company stock. However, the scrip, ended the week flat at KD0.0255 and topped the volume leaders list with 76.64mn shares changing hands. On the other hand, the Banking Sector topped the value list, accounting for 44.51 percent (KD52.50mn) of the total market traded value. National Bank of Kuwait (NBK) led the value traded stocks in the market with KD22.23mn traded. The stock closed down by 3.51 percent at KD1.100. Kuwait Finance House (KFH) followed with KWD14.64mn traded. The scrip ended the week with 6.12 percent loss at KD0.920, making it the biggest loser in the banking sector. The drop in the share price came after the bank announced a 35.78 percent drop in its 1H2011 bottom line results compared to the corresponding period of 2010. Net profit of KFH reached KD45.47mn.
All market sectors ended the week with losses. Heavy weighted Banking sector was the biggest loser, as its index shed 3.09 percent. Kuwait International Bank was the only gainer in the sector, adding 1.67 percent to its share value and closed at KD0.305. Global Real Estate Sector Index followed with a 2.44 percent drop in its value. Three of the real estate companies made it to the top losers list this week with Sanam Real Estate Company being in the lead, shedding 17.74 percent from its share value at KD0.051.
On the other hand, Real Estate Trade Center Company topped the gainers list, adding 11.67 percent to its share price and closed at KD0.134. Global Investment Index and Global Services Index ended lower by 1.47 percent and 0.60 percent, respectively. While Global Non-Kuwaiti Index lost a notable 2.11 percent from its value. Islamic companies saw a huge drop, as measured by Global Islamic Sharia Index. The index was down by 3.47 percent. Global Large Cap (Top 10) Index also closed lower by 2.12 percent.
Macroeconomic News
Figures issued by the Central Bank of Kuwait (CBK) showed that money supply (M2) in its broad sense had declined by 1.7 percent in June, to reach KD62,912.6mn, compared to May. The monthly bulletin said private sector deposits with local banks in Kuwaiti dinar came down 2 percent to KD25,441.5mn in June, while deposits in foreign currency came down 0.6 percent to KD1,764.2mn. The overall Kuwaiti banks claims to CBK funds (CBK bonds) came down 6.1 percent from May to KD1,610.0mn, while the overall budget of Kuwaiti banks came to KD42,147.5mn, which is an increase of 0.1 percent.
Net foreign assets of local banks kept to May's record, at KD3,5110.0mn, while time deposits with the CBK came down to KD1,605.3mn. Non-residents' deposits in Kuwaiti dinar came up 3.5 percent while deposits in foreign currency went up by 16.8 percent to KD2,624.4mn. Credit facilities for residents came up 0.4 percent to KD25,242.2mn, while average interest rate on 1-year treasury bonds stayed at 1.25 percent.
Governor of the Central Bank of Kuwait (CBK) Sheikh Salem Abdulaziz Al-Sabah said that the budget of (2011/2012) was set, after deducting the allocations of Kuwait Future Generations Fund (FGF), on the basis of an oil barrel price of $98 in what achieves economic balance, though it is a high and inflexible price. Sheikh Salem said that Kuwaiti banks still see lending risks, but their growth path is "comfortable" without surprises.
The central bank is in talks with the Capital Markets Authority (CMA) to reach an agreement on regulating investment firms, he said. "We are in negotiations with the CMA regarding (our roles), and we hope to reach an agreement to assign roles and responsibilities in order to change our scheme in regulating investment firms," he said.
Standard & Poor's Ratings Services raised its local and foreign currency sovereign credit ratings on the State of Kuwait to 'AA' from 'AA-'. The short-term ratings were affirmed at 'A-1+'. The outlook is stable. The stable outlook reflects the balance between Kuwait's very strong fiscal and external positions, on the one hand, and its ineffective, gridlocked political system, undiversified economy, and the lack of transparency regarding government assets on the other.
The transfer and convertibility (T&C) assessment, which reflects Standard & Poor's view of the likelihood of the sovereign (or central bank) restricting non-sovereign access to foreign exchange needed for debt service, is affirmed at 'AA+'. Kuwait's public finances remain exceptionally strong, and the general government budget has been recording surpluses at double-digit percentages of GDP for almost a decade.
S&P estimated the 2010/2011 budget year-which ended on March 31, 2011-- to have concluded with a budget surplus of 20% of GDP, after 28% the previous year. Budget revenues stem overwhelmingly from oil and investment income, which we estimate to have accounted for a combined 95% of government revenue in the budget year to March 31, 2011.
Oil price
Price of Kuwaiti crude oil rose by $0.65 during the last week, reaching $111.29 per barrels (pb) on Wednesday, July 20 compared to $110.64 recorded on Wednesday, June 13, as announced by Kuwait Petroleum Corporation (KPC). The increase of crude prices is a result of the decrease of the US dollar against other currencies. The increase of crude prices is a result of the decrease of the US dollar against other currencies. Moreover, oil rose over a dollar on Wednesday, bolstered by hopes of a US debt deal and by tightening crude stocks there, with investors awaiting further data likely to confirm that.
The Board of Commissioners of the Kuwaiti Capital Markets Authority (CMA) on Monday extended the ultimatum given to investment funds to comply with article 347 of the of Law No 7 of 2010, on ratios of investment on a single stock, for six months ending on March 12, 2012. In a press statement, the Board said that it will study investment ratios in the funds in light of the feedback of the bodies concerned and the general situation in the Kuwait Stock Exchange (KSE).
The decision stems from feeling of responsibility towards the national economy, particularly after latest economic developments and the state of KSE, which is one of the important pillars of the national economy, the Board underlined. Chairman and Managing Director of the Industrial Bank of Kuwait (IBK) Abdulmohsen Yousef Al-Haneef said that IBK continued to finance projects in Kuwait through providing 18 soft loans worth KD43.7mn in 2010 at a total cost of KD73.8mn.
Chairman of the Board of Directors of Al-Manar Financing Leasing Company Bader Al-Sumait said during the company's AGM held on Monday, July 18 that the company was able to get a loan from a local bank last April worth KWD10mn and was able to repay a loan worth KWD20mn last year. Al-Sumait said that the launching of several development projects by the government has encouraged banks to extend credit facilities, adding that the national portfolio set up by the Kuwait Investment Authority (KIA) with the economic rescue law have had a role in maintaining the cohesion of assets on the Kuwait Stock Exchange.
He said the actions taken by the government have led to the depreciation of value of allocations in Kuwaiti banks and the success of a number of Kuwaiti companies in restructuring their debts. Kuwait's Grand Real Estate Projects Company said that its board has decided to delist its shares from the Dubai Financial Market (DFM). The company said that it's completing the required delisting procedures with DFM and the UAE's Securities and Commodities Authority. Grand did not give a reason for the move.
Highlights
Governor of the Central Bank of Kuwait (CBK) Sheikh Salem Abdulaziz Al-Sabah said, "there are many indicators in the global economy raising concern, but this does not make us worried, and does not beckon a new financial crisis." Sheikh Salem added that the Cabinet asked him to file a report on the possibility of a new global financial crisis, noting that he made a presentation in this respect, particularly as there are problems in the EU, and US related to the volume of sovereign debts.
He also said that these problems are associated with unsatisfactory level of economic growth in the industrialized countries, besides soaring unemployment rate to unprecedented levels in these countries which primarily rely on the consumer expenditure. Sheikh Salem made clear that some countries did not take into account the fragility of some banking systems, pointing out that these conditions may lead to a decline in the demand for oil, which is the main, if not the only, source accounting for 92 percent
of the finance of the Kuwaiti budget. He also said that the budget's volume has rapidly grown over the past period, increasing five times in eleven years, a thing never seen by any other world country.
Heavy Engineering and Ship Building Company (HEISCO) has won tender No 1301/CB, on operating and maintaining the sediment processing unit in Mina Abdulla for Kuwait National Petroleum Company (KNPC). The KD2.13mn tender will last five years and three months. The company will duly inform the bourse upon signing the contract. Tamdeen Investment Company received a sum of KD6.6mn, for offloading a 40 percent stake in Beyoo Investment & Finance Company. Accordingly, Tamdeen generated KD2.6mn profit, which will be recorded in its 3Q2011 financial statement.
Alimtiaz Investment Company announced completing the increase of its stake in Beyoo Finance and Investment Company to 99.6 percent via paying KWD6.6mn to acquire 60mn shares of Beyoo Co. Major shareholders of Bank Muamalat, Indonesia's second largest Sharia lender, have decided to postpone a plan to sell down their stake in the bank, partly due to disagreement over pricing, said a bank executive this week.
Muamalat's top three shareholders, Islamic Development Bank, Boubyan Bank, and Saudi Arabia's Atwill Holdings Ltd, collectively control 75.7 percent of the lender and were trying to offload some or all of their holdings. Earlier this month Qatar Islamic Bank had pulled out of the bidding, leaving Standard Chartered Plc as the sole remaining bidder.
KUWAIT: The Kuwaiti bourse witnessed a turbulent week with various events causing the market to fluctuate. The first two sessions of the week were dramatic as the market indices dropped to levels not seen in long time. The diminishing performance of the market followed a statement from the Governor of the Central Bank of Kuwait (CBK), Sheikh Salem Abdul-Aziz Al-Sabah saying that Kuwait is witnessing imbalances in its economy which require corrections.
He stated that this could lead to a lot of risks at various levels. The negative statement fueled the pessimistic feeling between investors who rushed to cash out of the market. Also the arising financial crisis in the US and euro-zone further damped the sentiments. However, later on during the week traders got some boost in sentiments following the announcement of the newly formed regulator Capital Markets Authority's (CMA) decision to defer the implementation of new rules by six months.
CMA has given investment funds until March 12, 2012 to sort out their ownership in financial securities. According to the CMA bylaws, which came into effect in March 2011 but still not fully implemented, an investment fund cannot own more than ten percent in a single security. The index managed to rebound from its low levels recording gains for three consecutive days following the announcement, but remained below last week's closing level.
Kuwaiti Stock Exchange (KSE) experienced a huge drop reaching its lowest levels since July 6, 2010 on Monday, July 18, as measured by market weighted, Global General Index. The index lost 4.23 percent from its value during the first two trading sessions of the week. However, it bounced back regaining half of its losses but remained in the negative territory for the week. It closed lower by 1.96 percent at 187.14 points, escalating its year-to-date loss to 16.28 percent.
KSE price index performance was more dramatic as it reached levels not seen since 2004 on Monday after crossing below 6,000 point level for two days before adding new gains. The index ended the week shedding 1.47 percent (90.90 points) from its value and closed at 6,077.9 points (a 12.62 percent decline on a year-to-date basis). Market Capitalization declined by KD611.4mn during the week as it reached KD30.59bn. Market breadth was notably tilted to the losers side with 88 stocks closing at lower prices against 19 stocks advancing, out of 130 shares traded. Trading activity was much higher as investors' mood swung between selling and buying on developed news.
Moreover, the flow of 2Q2011 corporate results played a major role in determining investors decisions. Total weekly volume rose by 83.88 percent to 592.38mn shares changing hands at a total traded value of KD117.95mn (87.68 percent increase compared to the previous week). The Real Estate Sector was the most traded in terms of volume, accounting for 28.05 percent (166.15mn shares) of the total market traded shares.
Intensive trading was seen on Abyaar Real Estate Development Company stock. However, the scrip, ended the week flat at KD0.0255 and topped the volume leaders list with 76.64mn shares changing hands. On the other hand, the Banking Sector topped the value list, accounting for 44.51 percent (KD52.50mn) of the total market traded value. National Bank of Kuwait (NBK) led the value traded stocks in the market with KD22.23mn traded. The stock closed down by 3.51 percent at KD1.100. Kuwait Finance House (KFH) followed with KWD14.64mn traded. The scrip ended the week with 6.12 percent loss at KD0.920, making it the biggest loser in the banking sector. The drop in the share price came after the bank announced a 35.78 percent drop in its 1H2011 bottom line results compared to the corresponding period of 2010. Net profit of KFH reached KD45.47mn.
All market sectors ended the week with losses. Heavy weighted Banking sector was the biggest loser, as its index shed 3.09 percent. Kuwait International Bank was the only gainer in the sector, adding 1.67 percent to its share value and closed at KD0.305. Global Real Estate Sector Index followed with a 2.44 percent drop in its value. Three of the real estate companies made it to the top losers list this week with Sanam Real Estate Company being in the lead, shedding 17.74 percent from its share value at KD0.051.
On the other hand, Real Estate Trade Center Company topped the gainers list, adding 11.67 percent to its share price and closed at KD0.134. Global Investment Index and Global Services Index ended lower by 1.47 percent and 0.60 percent, respectively. While Global Non-Kuwaiti Index lost a notable 2.11 percent from its value. Islamic companies saw a huge drop, as measured by Global Islamic Sharia Index. The index was down by 3.47 percent. Global Large Cap (Top 10) Index also closed lower by 2.12 percent.
Macroeconomic News
Figures issued by the Central Bank of Kuwait (CBK) showed that money supply (M2) in its broad sense had declined by 1.7 percent in June, to reach KD62,912.6mn, compared to May. The monthly bulletin said private sector deposits with local banks in Kuwaiti dinar came down 2 percent to KD25,441.5mn in June, while deposits in foreign currency came down 0.6 percent to KD1,764.2mn. The overall Kuwaiti banks claims to CBK funds (CBK bonds) came down 6.1 percent from May to KD1,610.0mn, while the overall budget of Kuwaiti banks came to KD42,147.5mn, which is an increase of 0.1 percent.
Net foreign assets of local banks kept to May's record, at KD3,5110.0mn, while time deposits with the CBK came down to KD1,605.3mn. Non-residents' deposits in Kuwaiti dinar came up 3.5 percent while deposits in foreign currency went up by 16.8 percent to KD2,624.4mn. Credit facilities for residents came up 0.4 percent to KD25,242.2mn, while average interest rate on 1-year treasury bonds stayed at 1.25 percent.
Governor of the Central Bank of Kuwait (CBK) Sheikh Salem Abdulaziz Al-Sabah said that the budget of (2011/2012) was set, after deducting the allocations of Kuwait Future Generations Fund (FGF), on the basis of an oil barrel price of $98 in what achieves economic balance, though it is a high and inflexible price. Sheikh Salem said that Kuwaiti banks still see lending risks, but their growth path is "comfortable" without surprises.
The central bank is in talks with the Capital Markets Authority (CMA) to reach an agreement on regulating investment firms, he said. "We are in negotiations with the CMA regarding (our roles), and we hope to reach an agreement to assign roles and responsibilities in order to change our scheme in regulating investment firms," he said.
Standard & Poor's Ratings Services raised its local and foreign currency sovereign credit ratings on the State of Kuwait to 'AA' from 'AA-'. The short-term ratings were affirmed at 'A-1+'. The outlook is stable. The stable outlook reflects the balance between Kuwait's very strong fiscal and external positions, on the one hand, and its ineffective, gridlocked political system, undiversified economy, and the lack of transparency regarding government assets on the other.
The transfer and convertibility (T&C) assessment, which reflects Standard & Poor's view of the likelihood of the sovereign (or central bank) restricting non-sovereign access to foreign exchange needed for debt service, is affirmed at 'AA+'. Kuwait's public finances remain exceptionally strong, and the general government budget has been recording surpluses at double-digit percentages of GDP for almost a decade.
S&P estimated the 2010/2011 budget year-which ended on March 31, 2011-- to have concluded with a budget surplus of 20% of GDP, after 28% the previous year. Budget revenues stem overwhelmingly from oil and investment income, which we estimate to have accounted for a combined 95% of government revenue in the budget year to March 31, 2011.
Oil price
Price of Kuwaiti crude oil rose by $0.65 during the last week, reaching $111.29 per barrels (pb) on Wednesday, July 20 compared to $110.64 recorded on Wednesday, June 13, as announced by Kuwait Petroleum Corporation (KPC). The increase of crude prices is a result of the decrease of the US dollar against other currencies. The increase of crude prices is a result of the decrease of the US dollar against other currencies. Moreover, oil rose over a dollar on Wednesday, bolstered by hopes of a US debt deal and by tightening crude stocks there, with investors awaiting further data likely to confirm that.
The Board of Commissioners of the Kuwaiti Capital Markets Authority (CMA) on Monday extended the ultimatum given to investment funds to comply with article 347 of the of Law No 7 of 2010, on ratios of investment on a single stock, for six months ending on March 12, 2012. In a press statement, the Board said that it will study investment ratios in the funds in light of the feedback of the bodies concerned and the general situation in the Kuwait Stock Exchange (KSE).
The decision stems from feeling of responsibility towards the national economy, particularly after latest economic developments and the state of KSE, which is one of the important pillars of the national economy, the Board underlined. Chairman and Managing Director of the Industrial Bank of Kuwait (IBK) Abdulmohsen Yousef Al-Haneef said that IBK continued to finance projects in Kuwait through providing 18 soft loans worth KD43.7mn in 2010 at a total cost of KD73.8mn.
Chairman of the Board of Directors of Al-Manar Financing Leasing Company Bader Al-Sumait said during the company's AGM held on Monday, July 18 that the company was able to get a loan from a local bank last April worth KWD10mn and was able to repay a loan worth KWD20mn last year. Al-Sumait said that the launching of several development projects by the government has encouraged banks to extend credit facilities, adding that the national portfolio set up by the Kuwait Investment Authority (KIA) with the economic rescue law have had a role in maintaining the cohesion of assets on the Kuwait Stock Exchange.
He said the actions taken by the government have led to the depreciation of value of allocations in Kuwaiti banks and the success of a number of Kuwaiti companies in restructuring their debts. Kuwait's Grand Real Estate Projects Company said that its board has decided to delist its shares from the Dubai Financial Market (DFM). The company said that it's completing the required delisting procedures with DFM and the UAE's Securities and Commodities Authority. Grand did not give a reason for the move.
Highlights
Governor of the Central Bank of Kuwait (CBK) Sheikh Salem Abdulaziz Al-Sabah said, "there are many indicators in the global economy raising concern, but this does not make us worried, and does not beckon a new financial crisis." Sheikh Salem added that the Cabinet asked him to file a report on the possibility of a new global financial crisis, noting that he made a presentation in this respect, particularly as there are problems in the EU, and US related to the volume of sovereign debts.
He also said that these problems are associated with unsatisfactory level of economic growth in the industrialized countries, besides soaring unemployment rate to unprecedented levels in these countries which primarily rely on the consumer expenditure. Sheikh Salem made clear that some countries did not take into account the fragility of some banking systems, pointing out that these conditions may lead to a decline in the demand for oil, which is the main, if not the only, source accounting for 92 percent
of the finance of the Kuwaiti budget. He also said that the budget's volume has rapidly grown over the past period, increasing five times in eleven years, a thing never seen by any other world country.
Heavy Engineering and Ship Building Company (HEISCO) has won tender No 1301/CB, on operating and maintaining the sediment processing unit in Mina Abdulla for Kuwait National Petroleum Company (KNPC). The KD2.13mn tender will last five years and three months. The company will duly inform the bourse upon signing the contract. Tamdeen Investment Company received a sum of KD6.6mn, for offloading a 40 percent stake in Beyoo Investment & Finance Company. Accordingly, Tamdeen generated KD2.6mn profit, which will be recorded in its 3Q2011 financial statement.
Alimtiaz Investment Company announced completing the increase of its stake in Beyoo Finance and Investment Company to 99.6 percent via paying KWD6.6mn to acquire 60mn shares of Beyoo Co. Major shareholders of Bank Muamalat, Indonesia's second largest Sharia lender, have decided to postpone a plan to sell down their stake in the bank, partly due to disagreement over pricing, said a bank executive this week.
Muamalat's top three shareholders, Islamic Development Bank, Boubyan Bank, and Saudi Arabia's Atwill Holdings Ltd, collectively control 75.7 percent of the lender and were trying to offload some or all of their holdings. Earlier this month Qatar Islamic Bank had pulled out of the bidding, leaving Standard Chartered Plc as the sole remaining bidder.
© Kuwait Times 2011
