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Kuwaiti index continues bullish trend

Commentary
Kuwait Stock Market managed to continued its bullish trend recording its biggest weekly gains since the week ending in March 31, 2007. The Kuwaiti stock market, as measured by Global General Index <.GLOB> concluded the week with an increase of 2.04 percent to close at 326.40 points, its highest level since February 15, 2006. On Year- To-Date performance, the market's gains reached 12.25 percent. Market capitalization reached KD47.70bn. Market breadth skewed towards advancers with 70 stocks advancing against 62 stock declining.

Trading activity this week was negative compared to the un-ordinary high trading activity recorded last week. Volume of shares traded on the bourse declined by 7.19 percent, reaching 1.67bn shares. Meanwhile, value of shares traded dropped by 56.23 percent, aggregating to KD974.77mn after the high un-explained trading activities on Mobile Telecommunications Company's (MTC) share price recorded last week (currently under investigation by KSE) slightly calmed down. The Investment sector accounted for 34.75 percent of volume traded this week with 581.56mn shares changing hands. The Services sector came on top of the value list with KD418.94mn, accounting for 42.98 percent of the total traded value.

Market sectors performance was mainly positive with six sector indices ending the week recording gains. Global Services Index was the top gainer, with an increase of 5.38 percent for the week, backed by an increase in the two large capitalization mobile telecommunication companies listed under the sector. Worth to mention, is that five of the services companies were traded ex-dividend this week. On Year-To-Date performance, the services sector appreciated by 31.76 percent. Global Industrial Sector Index came second, adding 4.20 percent. On the other side, Global Real Estate Index was the biggest loser, shedding 0.93 percent. The Banking Index was the second and only other loser with 0.33 percent decline.

Global Large Cap. 10 index was Up for the week, adding 3.30 percent. Global Islamic Index managed to add 0.32 percent. On the other hand, Global Small Cap. 10 index was seen down by 1.67 percent. Gulf Cement Company's share was the biggest gainer this week, adding 27.06 percent to close at KD0.540. Shuaiba Paper Products Company

was seen down by 12.16 percent, at KD0.224. Arab Real Estate Company accounted for 7.80 percent of the total traded volume this week with 130.50mn shares changing hands.

Macroeconomic
Data published by the Central Bank of Kuwait this week showed that Kuwait's foreign assets posted their sharpest monthly increase in at least five years as speculators piled into the Kuwaiti dinar betting on a revaluation. The Central banks foreign assets surged 46 percent to KD6.02bn (US$20.82bn), more than double the rate of increase in the previous month. Kuwait's dinar, like other currencies in the Gulf Arab region, is pegged to the U.S. dollar, but speculation has grown that the OPEC oil producer would allow its dinar to appreciate as the dollar weakens.

Assets, deposits, loans and credit facilities of local banks witnessed a noticeable increase in the first quarter of 2007 compared to the same period last year. According to the Central Bank of Kuwait's (CBK) bulletin for March, assets of local banks reached KD29bn in the first quarter of this year, an increase of 24.5 percent over the same period last year. This increase was attributed to demands of the private sector which reached KD17.1bn compared to KD13.6bn, while CBK deposits increased to KD2.7bn compared to KD1.7bn in the first quarter of 2006. Loans and credit facilities rose by KD3.3bn to rearch KD15.8bn.

Kuwait posted record income of US$53.5bn in the last fiscal year that ended in March 31, 2007, announced the finance ministry. It is the first time that revenues of Kuwait have topped US$50bn in a single fiscal year. According to figures published by the ministry, revenues are up about 13 percent over the US$47.4bn posted in the previous year and exceeded the government's whole year projection of US$29.5bn by US$24bn. Oil revenues reached KD14.5bn (US$50.2bn), constituting 94 percent of total income, also the largest ever in the state's history. Oil income is up 12 percent over the previous fiscal year of 2005/2006 and almost twice the budget projection of US$26.8bn, the ministry figures showed. The budget calculated oil income at the conservative price of US$36 a barrel while the actual price of Kuwaiti oil averaged around US$58 last fiscal year.

Oil related
The price of Kuwaiti crude oil reached US$59.96 per barrel on April 23, an increase of US$0.66 from last Friday, April 20 price of US$59.30 per barrel, according to Kuwait Petroleum Corporation (KPC). Initial tests carried out by Kuwait Oil ministry discovered a large new gas field in the north of the country. The new gas field is near Umm Niqa, located between Al-Rawdatain and Al-Abdali in northern Kuwait. No more details were given on this issue. Previously, Kuwait announced a major find near Umm Niqa in March 2006, adding 35 trillion cubic feet in new gas reserves. Kuwait Oil Minister Sheikh Ali Al-Jarrah Al-Sabah said that Kuwait hopes for more gas discoveries after making a major find in the north of the Gulf Arab state. Kuwait is a major oil producer, which controls a tenth of global oil reserves, needs more gas to help generate electricity to meet soaring demand for power in summer.

The Kuwaiti World Oil and Environment Company, an affiliate of the Kuwaiti Oil Investment Company, has won 50 percent of Egypt's Kom Ombo oil field exploration and production concession. Farouk Al-Yahia, chairman of the company, said that his company had signed the concession contract with Canada's Centurion Company, owned by Dana Gas , which has the Egyptian oil field exploration concession. The oil field covers 22,000 square kilometers, a large acreage that allows the company to carry out major exploration operations, he added. Oil well digging processes are expected to kick off within a few weeks' time of the contract signing, Al-Yahia said, noting that the company aims to boost production to 10,000 barrels/day and to raise oil stock to 50mn barrels by 2010.

Kuwait Petroleum Corporation (KPC) extended its long-term oil products supply contract with Bangladesh until December 2008. KPC said that the extension was part of boosting ties with Asian markets that have a high level of oil-products' consumption, as well as continuing good relations that started with Bangladesh in 1990s. The contract was signed in 2003 with Bangladesh that has a very stable and high consuming market, noted KPC. According to Oil Gas journal (OGJ), as of January 2006, Bangladesh has 28mn barrels of proven oil reserves, down from 56mn barrels in 2005.

Local news
A Kuwaiti shareholding company (closed) was established with a total capital of KD10mn, said Kuwait Gazette this week. Al-Amanah Insurance Company is an Islamic sharia compliance providing insurance, reinsurance and investment activities in and outside Kuwait.

Recent reports
In continuation of Global Investment House's coverage on the listed Indian banks, we have come out with an initial equity research on Corporation Bank . The total asset size of the bank reported a CAGR of 15.5 percent during the period FY01-FY06 and reached Rs.405mn at the end of March 2006. The asset base increased to Rs.486.1bn as of December 2006. In 9MFY07, the bank reported net interest income (NII) of Rs.9.75bn, representing a growth of 6.43 percent over 9MFY06 while the bank reported a net profit of Rs.4.2bn, registering an increase of 21.35 percent during the same period. Total deposits of the bank grew at a CAGR of 14.7 percent during the last five years to reach Rs.328.7mn as of March 2006 with low cost deposits registering an impressive CAGR of 20.8 percent during the same period. The total deposits reached Rs396.49bn as of December 2006. Contribution of low cost deposit to total deposit as of 9MFY07 was 29 percent as compared to 34.44 percent in FY06, thereby significantly increasing cost of funds and hence margin contraction. At the CMP, stock trades at 7.5x and 6.4x of its earnings for FY07E and FY08E respectively and 1.34x and 1.26x of its adjusted book value. We initiate our coverage of Corporation Bank with a BUY rating and value the bank's share at an intrinsic value of Rs.304 based on the Discounted Dividend Method (DDM) and peer group valuation method. The intrinsic value is higher than the current market price by 11 percent.

Full report can be viewed under: http://www.globalinv.net/research/Corporation-Bank-042007.pdf

Newly Listed
Next week will witness the listing of two new companies in Kuwait Stock Exchange. Future Communications Company will be listed on Saturday, April 28, 2007, under the Services sector with a paid-up capital of KD7mn. Gulf Horizon Holding Company, with a paid-up capital of KD30mn will be listed on Monday, April 30, 2007 under the Real Estate sector. These are the second and third new companies to be listed in Kuwait Stock Exchange this year after the listing of Villa Moda under the Services sector on January 22. The listing of the two new companies will bring the total listed stock on the Kuwaiti market to 183.

KSE
Global Investment House announced this week that it has successfully completed a KD45mn bond issue comprised of two tranches with 5-year tenor, and a (BBB+) rating from Capital Intelligence rating agency. The first is a fixed rate tranche valued at KD20mn carrying a fixed coupon of 7.00 percent per annum. The second is a floating rate tranche valued at KD25mn carrying a floating rate of 6 month KIBOR+ 1.00 percent per annum. Both coupons are paid semi annually. The main objective of the issue is to restructure the company's debt and invest the proceeds in the company's various activities. Mishrif Trading & Contracting Company has signed a KD3.2mn contract with Kuwait Oil Company (KOC) to design, supply, install and upgrade the safety level of control valves for operating wells during emergencies in six centers at the southern part of Kuwait for a period of 20 months starting from May 5, 2007.

Al-Ahlia Investment Company said that it expects a profit of KD43mn from the sale of its 40 percent stake in GulfInvest International if finalized. Al-Ahlia stated that it had received an offer of 445fils per share from an unlisted Kuwaiti company for the 180mn shares it has in GulfInvest.

Kuwait Finance & Investment Company said that it had bought 65 percent of unlisted brokerage firm Al-Ahlia Brokerage Company for KD13mn. Kuwait Finance bought shares of Al-Ahlia for KD1 each. Gulf Cables & Electrical Industries Company said it had won a KD6.7mn contract to supply cables to the Ministry of Electricity and Water. No more details were given on this regards.

Combined Group Company for Contracting was invited by the Ministry of Electricity and Water to sign a contract for the supply, installation, operation and maintenance of gas generation turbines at the Subiya station. The deal worth KD82mn.

Strengthening its position as a leading Islamic bank in the GCC, Bahrain-based ABC Islamic Bank has won the distinction of being the sole mandated arranger for a US$100mn, five-year amortizing, revolving Murabaha facility for Kuwait's International Leasing & Investment Company . The facility has been fully underwritten by ABC Islamic Bank.

Al-Safat Investment Company announced that it will purchase 31.22mn shares of Arab Holding Company (AHC), which is 52.01 percent of the total shares, at 280fils per share. AHC expects to earn a profit of KD2.80mn in the event of the consummation of the selling price at 280fils par share. AHC Board of Directors has agreed to accept the offer, which will be implemented in accordance with the procedures established in the market.

This week
Kuwait was ranked fourth in foreign investments in Syria with a total of 21 projects, said Director General of the Syrian Investment Authority Mustafa Al-Kafri. He said that Turkish investors were still in the lead with 32 projects, followed by the Saudis with 27, then the Lebanese with 23, Kuwaitis with 21 projects and finally Jordanian investors with 19 projects. Syria had recently issued a new investment law aimed at attracting foreign investments.

Technical analysis
Kuwait Pipe Industries & Oil Services Company
In Global Investment House "Global's" technical analysis on Kuwait Pipe Industries & Oil Services Company

stock, as presented in the graph beneath, the stock has been in a sharp slip since May 2005 when it traded at KD1.120. However, it reached a support at 315fils and could not close below it in the last two months. PIPE stock closed at 435fils this week.

It is worth mentioning that the stock's movement in the last few weeks indicated a rounding upwards, reversing its direction, and forming a ''saucer'' shape. Also, the stock crossed-over this week the resistance at 390fils, backed by high trading activities. Furthermore, the stock's MACD is signaling a possible position building on the stock. Therefore, medium-term (11 week) and long-term (50 week) investors can start building positions at current levels, provided that a stoploss signal is initiated if the stock trades below the support at 420fils.

© Arab Times 2007