• Home
• Financial Services
• News Article

Kuwait: KD5bn fund buoys stocks, investors optimistic

KUWAIT: The Kuwait Stock Exchange ended its six-week-long bearish trend and managed to conclude this week on positive note. This was largely due to the high hopes that the government will reach an agreement to save the stock market and the national economy. The government confirmed at the end of this week that it has approved a KD5 billion fund aimed at providing liquidity for local companies. This news added to the investors' optimism causing an intensive trading activity. The weighted "Global" General Index closed at 180.11 points, a 12.22 percent increase from last week's closing. On year to date basis, the index is still down by 12.75 percent.
Kuwait Stock Exchange (KSE) Price Index was also up by 267.70 points (4.12 percent) this week, but still closing below the 7,000 level at 6,764.50 points. Market capitalization of the KSE was up at KD28.93bn by week end. Market breadth was seen skewed towards advancers for the first time since the week ended in November 20, 2008 with 111 stocks advancing against 52 declining. 32 equities out of the 203 listed companies within the regular Kuwaiti stock market did not see any trading activity during this week.
Trading activity was remarkably higher with most of the trading being concentrated on large capitalization stocks. Volume of shares traded on the exchange was up by 184.03 percent and stood at 1.49bn shares changing hands at a total value of KD362.52mn (+148.82 percent from the previous week). High volume was seen on the Investment stocks with the sector accounting for 27.82 percent of the total traded volume this week with 414.80mn shares traded. Company-wise, Gulf Finance House came on top of the volumelist this week with 124.52mn shares changing hands. The scrip was up by 22 percent and closed at KD0.244.
On the other hand, the banking sector led the value list with KD121.79mn traded accounting for 33.59 percent of the total market traded value. Kuwait Finance House and National Bank of Kuwait caused the high value. Both announced this week a loss in their net profit for the year ended in December 2008 due to taking higher provisions to help weather the financial crisis. Company-wise, Zain was the biggest value trader this week with KD51.95mn traded on its stock. The scrip closed up by 18.18 percent at KD0.780.
Except for the Insurance sector which was down by 5 percent this week, all other sectors were seen up. Global Banking Index was the major gainer, adding 18.52 percent with Boubyan Bank being the biggest gainer in the sector. The scrip was up by 43.44 percent and closed at KD0.350. Global Real Estate Index was the second biggest gainer, up by 16.18 percent with two of its constituents making it to the top gainers list this week. International Investment Projects came on the lead, adding 69.44 percent and closed at KD0.031. Also Grand Real Estate Projects Company gained 59.52 percent and closed at KD0.034. Global Food Index followed, adding 15.78 percent.
Al-Madar Finance and Investment Company led the losers list this week, shedding 40 percent of its share price and closed at KD0.060. The Sharia-compliant Global Islamic Index was a notable gainer, adding 24.39 percent regaining all its last weeks' loss. Global Large Cap (Top 10) index was also up by 18.70 percent while Global Small Cap (Low 10) Index added 10.65 percent.
Macroeconomic News
Kuwait's annual money supply growth fell to 15.78 percent in December, down from 17.97 percent in November, official data showed. M2, a measure of money circulating in the economy, hit KD21.95bn in December, compared with KD18.96bn a year earlier, the Central Bank of Kuwait (CBK) said in its monthly report. Money supply growth is an indicator of future inflation. Annual inflation in Kuwait eased to 10.81 percent in September, according to the latest available data. Annual growth in narrow money, or M1, fell to 5.40 percent at KD4.37bn in December, down from 11.26 percent in November, the data showed. Kuwait severed its dinar's peg to the US dollar in May 2007, saying that dollar weakness was stoking inflation by making some imports more expensive. In December, CBK reduced the benchmark discount rate by 50 basis points to 3.75 percent following a US rate cut.
Kuwaiti government revenues reached KD18.55bn in the first nine months of the fiscal year, almost covering full-year budgeted spending, the finance ministry said. For its fiscal year to March, OPEC member Kuwait has projected spending at KD18.996bn and revenues at KD12.68bn. Oil revenues up to the end of December came at KD17.57bn, up 50.8 percent on the budget target for the whole year, official figures showed. Spending in nine-months to December was KD8.73bn, just 46 percent of budgeted outlays for the whole year. This leaves the oil-rich country with a provisional budget surplus of KD9.82bn.
Japan's trade deficit with Kuwait narrowed 51.5 percent in December 2008 to JPY57.61bn ($643.5mn) from a year earlier, posting the down figure for the 11th straight month but shrinking for the second in a row. The nation's trade deficit with the entire Middle East also shrank 54.2 percent to JPY544.15bn ($6.08bn), the Finance Ministry said. Exports to Kuwait fell 6.9 percent year-on-year to JPY18.99bn ($212.2mn) in December, while imports tumbled 45.0 percent to JPY76.60bn ($855.7mn), the ministry said in a preliminary report.
The Organization of Petroleum Exporting Countries (OPEC) producer Kuwait is seeking to stabilize oil market and would support a further output cut if that helped the Gulf Arab state's acting oil minister said. "The primary concern is stability of the market. If that requires an output cut, so be it," Sheikh Mohammad Al-Salem Al-Sabah when asked whether OPEC should further cut production. He declined to give a fair price for oil, saying only: "We're not fixing prices." Venezuelan President Hugo Chavez says OPEC could further reduce oil production to boost low prices. OPEC has reduced output by 4.2mn barrels per day since September through a series of production cuts as the 13-member cartel seeks to bolster prices.
The government confirmed this week that it has approved a KD5bn fund aimed at providing liquidity for local companies. The Minister of Finance Moustafa Al-Shamali has affirmed that the government will carry on with its procedures to ensure the revitalization of the national economy. "The ministerial economic committee will outline all relevant issues in a report to be discussed by the government," the minister was quoted as saying.
Al-Shamali reassured all that the economic rescue package will not favor any one side over another, and stressed that it will serve the best interests of Kuwait as a whole. He added that the government will also announce a fund to shore up the struggling economy soon. The National Assembly will discuss the crisis on February 10 at the request of 15 law makers as pressure is mounting on the government to control spending to soften the impact of the global crisis that is being felt in the country despite its
oil wealth.
Investment portfolios of the GCC countries are looking to invest at the Kuwaiti stock market and build a price position in a number of low priced position in a number of low priced shares of local investment companies. Sources said that, "It is obvious that these portfolios are targeting expected profit from governmental support, which will close gaps in prices of these shares,". The sources added that these portfolios are intended to make a swift move after sensing that the Kuwaiti government is serious about rescuing the national economy and solving problems involving companies, individuals and firms. More than $500mn will be pumped into the Kuwait Stock Exchange within the coming phase, the source said, adding that the "Gulf portfolios have been collecting data and they are very well informed about the operation and performance of Kuwaiti companies.
Kuwait Investment Authority (KIA), the state's sovereign wealth fund, has reduced exposure to global stock markets since October 2008, shifting assets instead into short-term cash funds, a government report said. In a briefing to parliament, the government said KIA had cut the ratio of international share investments in a key fund in a bid to minimize the effect of the global financial crisis on Kuwait, the world's seventh-largest oil exporter.
MEED reported that work on Kuwait City's $7bn metro project is being postponed for at least 18 months as the government undertakes a wide ranging study of the country's land based transport requirements. Source in Kuwait said that the project, which has been planned independently of the government, mush now be folded into the nationals transport strategy.

© Kuwait Times 2009

---

© Copyright Zawya. All Rights Reserved.

---