Investors turned to full year 2018 company earnings for direction during the month of February, as oil prices and world stocks stabilised, with market participants cautiously following news on trade talks between the United States and China.

The MSCI World index rose 2.83 percent in February, data from Eikon showed, while Brent oil prices gained 6.69 percent. Both global markets and oil prices were also much less volatile than they had been in January, when the MSCI World Index gained 7.60 percent and Brent oil prices surged 15.04 percent.


Dubai’s index outperformed its peers in the Gulf during February, gaining 2.66 percent.

“Dubai saw some traction in the high-yielding dividend plays,” Nishit Lakhotia, head of research at Bahrain-based SICO, told Zawya by email.

“The rally in the beaten-down real estate names started after February 12, and despite the last day sell-off (on February 28), the overall index rallied 2.7 percent during the month, led by Emaar Properties and Emaar Malls, which were up 14 percent and 12 percent in February,” Lakhotia added.

Data from Eikon shows that Emaar Properties and Emaar Malls were the two top-performing stocks on Dubai’s index in February, followed by Dar Al Takaful, which gained 6.15 percent.

The real estate sector in the UAE witnessed a sharp slowdown in 2018. A Thomson Reuters index of UAE real estate shares dropped 38 percent last year. However, the index has rebounded by 9.28 percent during the first two months of this year.

“I believe investors have smartly started repositioning from the expensive Tadawul names to beaten -down, high yielding names in Dubai, a trend we anticipated,” Lakhotia said.

He added that turnover recovered in Dubai from a $32 million average daily trading volume (ADTV) level in January to $52 million in February.

“We still believe traction in Dubai will continue ahead of dividend announcement(s) by most of the key names for FY18 (full year 2018),” Lakhotia ended.

Abu Dhabi’s index was the second top performer in the Gulf, adding 1.84 percent in February.

Ras Al Khaimah Cement was the exchange's main gainer, rising 29.51 percent according to Eikon data, followed by a 23.85 percent increase in the shares of Abu Dhabi National Hotels and a 12.68 percent increase in the value of Emirates Driving.

Lakhotia said that the rise in the shares of First Abu Dhabi Bank (FAB) helped the Abu Dhabi index end the month higher “as investors positioned ahead of expected higher flows” from passive investors following the bank's announcement that shareholders had approved a recommendation to increase the bank's foreign ownership limit from 25 percent to 40 percent, which should give the stock a higher weighting in MSCI indices (Read more here).

FAB’s shares rose 3.12 percent in February.

“Also, Aldar Properties surprised the market with (a) higher than expected dividend announcement for FY18 and the stock rallied 12 percent during the month. We see limited triggers in (the) Abu Dhabi index from current levels in the near term,” Lakhotia said.

Aldar Properties’ board of directors proposed a 14 fils per share dividend for the full year 2018, translating into a 17 percent increase compared to 2017.

Saudi Arabia

Saudi Arabia’s index fell 0.79 percent in February, following an excellent start to 2019, when it gained 9.37 percent in value in January.

Shares in Abdullah Abdul Mohsin Al Khodari Sons Company were the biggest drag on the index, dropping 38.23 percent according to Eikon data, as the construction company announced that accumulated losses had now reached more than 1.1 billion riyals, or more than 198 percent of its capital.

Amana Insurance’s shares fell 26.47 percent and Saudi Arabian Amiantit’s shares fell 14.57 percent.

SICO’s Lakhotia said that the Saudi index was “noticeably weak in the month of February as the market consolidated and there appeared to be profit booking in the banking sector, which has been leading the rally.”

A Thomson Reuters index of Saudi banks shows that the sector has dropped 0.9 percent in value in  February, after sharply rising 13.29 percent in January.

“Another interesting and rather worrying aspect is the declining turnover in Tadawul with merely $627mn ADTV in February, perhaps one of the lowest monthly turnover (figures) in recent history,” Lakhotia added.

Foreigners have piled into the Saudi market since the start of 2019, following announcements by index compilers FTSE Russell, MSCI and S&P Dow Jones that the stock market would be upgraded to their emerging market indices in 2019. FTSE Russell’s inclusion will begin before the end of March, while MSCI and S&P Dow Jones’ upgrades will commence in June and July 2019 respectively.

“While foreigners and QFI’s (qualified foreign investors) continue to be net buyers in Tadawul, the intensity seems to be coming off during February, especially after the first week,” SICO’s Lakhotia said.

“Going ahead, we expect (the) market to see another leg upwards before MSCI inclusion; also, one cannot ignore the fact that oil continues to edge upwards with Brent being $65-plus per barrel,” he ended.”

Brent prices have increased by 22.73 percent during the first two months of the year, Eikon data shows.


Egypt’s blue-chip index EGX30 put in an excellent performance in February, adding 4.79 percent and outperforming its MENA peers.

“The strong momentum in stocks was driven by Central Bank of Egypt’s (CBE) 100 basis point cut in the overnight lending rate to 15.75 percent, which was again due to the sharp fall in consumer price inflation,” Yogesh Khairajani, an investment research analyst at Century Financial, told Zawya by email.

The CBE cut its overnight interest rates in mid-February for the first time since March 2018. The bank lowered both its deposit rate and its lending rate by 1 percent, to 15.75 and 16.75 percent respectively. (Read more here).

“Currently EGX 30 is trading at 9.8 and 7.6 times of 2019 and 2020 expected earnings," Khairajani said. "Indeed, these are very cheap valuations which should attract more foreign investments into equities,” he added.

The Wall Street Journal reported on Monday that the U.S. could lift most or all of its tariffs on Beijing, while a summit between U.S. President Donald Trump and his Chinese counterpart Xi Jinping to sign a final trade deal could happen later this month, according to a Reuters report.

“With a US-China deal in sights and a strong recovery in the EGP (Egyptian pound), the Egyptian market is expected to continue to accelerate,” Iyad Hweij, managing director of Allied Investment Partners, told Zawya by email.

“Government planned IPOs are also expected to be announced during the year, which is expected to attract investments.”

The first of a series of planned sales of stakes in government companies began this week, with the listing on the Egyptian exchange of a 4.5 percent stake in tobacco firm Eastern Company.

Hweij warned that although the CBE cutting rates is expected to have a positive impact on the Egyptian market, “unfavorable macroeconomic trends may thwart a complete recovery of the Egyptian market in 2019.”

Data from Eikon shows that Orascom Investment Holding was the best performing stock on the index, adding 29.38 percent in February, followed by Arabia Cotton Ginning with a 23.19 percent increase and in Palm Hills Development. with an 18.88 percent rise. 


Qatar’s index fell 5.68 percent in February and was the worst performer among its peers in the region.

Century Financial‘s Khairajani said that “Qatar had a pretty dull February”, citing profit booking from investors.

“Valuations have caught up with the Qatar index, which was one of the best performers in 2018. Currently it is trading at 14.1 times TTM (trailing twelve months) earnings and this is in line with the two year PE (price-to-earnings) average of 14.4,” he added. The Qatari index rose 20.83 percent in 2018.

The market's worst performers for the month of February, according to data from Eikon, were United Development Company (which dropped 17.57 percent), Gulf International Services (-15.7 percent) and Qatar Insurance (-14.08 percent). 

“Upside seems to be limited, as the earnings growth is not expected to be more than 9-10 percent annually for the coming two years and it is not spectacular, given the valuations. For the year, the index is likely to move in a range of 9,800-11,400,” Khairajani said. The index closed on the last day of February at 10,111. 


Oman’s index was an underperformer in February, dropping 0.53 percent.

A report sent to the media by the research arm of Kuwait Asset Management Company (Kamco Research) on Sunday, said: “After reaching multi-year lows, the benchmark recovered slightly during the last week to close the month at 4,144.47 points.”

Data from Eikon shows that Galfar Engineering and Contracting, Al Anwar Ceramic Tiles and Al Jazeera Services were the top performers during the month, adding 15.28 percent, 14.86 percent and 13.59 percent respectively.

The rise in Al Jazeera Services’ shares came “after the company’s board proposed a cash dividend of 10 baizas per share for FY-18 (as against 15 baizas per share for FY-17),” the Kamco report added.

On the other hand, Sembcorp Salalah Power and Water Company was the worst performer on the exchange, dropping 13.69 percent, followed by Renaissance Services (-8.82 percent) and Raysut Cement (-7.89 percent).

“Trading activity in the equity market remained mixed during the month, with (an) increase in monthly volume traded but a decline in monthly value traded due to higher trade in small-cap stocks," the Kamco report said. The total volume of shares traded on the exchange jumped more than 50 percent to 400.7 million in February, compared to 261.7 million in January, it added.


Bahrain’s index gained 1.53 percent in February, after adding 4.05 percent in the previous month.

This uplift was driven by the performance of Bahrain's commercal banks, driven by gains made by Ahli United Bank (AUB), which is the subject of a merger with Kuwait Finance House. AUB's shares gained 8.6 percent in February, pushing up an index of banking stocks by 6 percent month-on-month.

Kuwait Finance House (KFH) and AUB announced in January 2019 that they had agreed to merge, having been in talks since mid-2018. The Bahraini and Kuwaiti lenders said the deal is subject to completion of due diligence and required approvals by regulators.

KFH said in a statement to the Kuwaiti exchange in February that the Central Bank of Kuwait has granted initial approval for its merger with AUB. (Read more here).

“Trading activity in Feb-19 was down on an m-o-m basis, as compared to Jan-19," the Kamco report said, stating that volume fell by 28.8 percent month-on-month to 98.3 million shares.

Data from Eikon showed that Bahrain Commercial Facilities Company outperformed its peers on the exchange, followed by APM Terminals and Zain Bahrain, with gains of 18.06 percent, 13.37 percent and 12.66 percent resptectively.

The worst performers on the exchange were Aluminium Bahrain, dropping 27.24 percent, followed by a 16.67 percent drop in the shares of Ithmaar Bank and a 9.56 percent drop in Bahrain Islamic Bank’s shares.


Kuwait’s premier market index rose 0.96 percent in February.

On April 1 2018, Kuwait divided its stock market into three segments as part of a reform programme aimed at improving the attractiveness of the exchange to investors. The three market segments are the premier market, the main market and the auction market.

“In terms of sector performance, the Technology index was the top performer during the month with a gain of 9.3% followed by the Oil & Gas index at 5.9%,” Kamco’s report said.

On the premier market, Ahli United Bank (Kuwait) outperformed the rest of the listed stocks, adding 6.9 percent, data from Eikon shows. Burgan Bank was the second top performer with its shares gaining 6.16 percent, while Integrated Holding Company’s shares added 4 percent.

The worst performer on the index was Human Soft Holding Company, dropping 6.25 percent, followed real estate developer Mabanee (-5.95 percent) and Boubyan Bank (5.87 percent).

Kamco's report said that trading activity remained "weak" during the month, as there were fewer tading days as a result of the National Day and Liberation Day holidays. The monthly volume of shares dropped by 37 percent, and the monthly value traded fell by 28 percent, to 2.5 billion shares and 439 million Kuwaiti dinars ($1.45 billion) respectively.

(Reporting by Gerard Aoun; Editing by Michael Fahy)


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