Global : KSE stocks head higher in April.
Global Investment House - Kuwait Stock Exchange Performance - April 2005 - Kuwaiti equities logged their 10th positive monthly gain in the last 11 months, as a string of positive economic data and a strong reading on the earnings front were enough to set off another round of gains. The benchmark "Global" General index ended just shy of its all-time high, clocking its fourth straight monthly gain, up 8.9% for the month and 29.5% on the year. Since regaining its footing this time last year, the market has produced gains of 51.8%.
In the economic arena, the encouraging impact of the recent spike in oil prices could clearly be seen in the data for trade, fiscal position, inflation and rising liquidity levels. Results for the 2004 balance of payments has cemented the great year which 2004 shaped out to be. The overall balance reversed from its negative KD523.8mn level at the end of 2003 to a positive level of KD197.0mn in 2004, its best turnout since 2001. The overall balance was boosted by the doubling of the current account on the back of the rising oil exports and higher investment income, which was helped by rising international interest rates. As for inflation, although we continue to witness rising levels of liquidity in the economy, inflation levels have continued to taper off from their highs of 2004. The growing strength of the US dollar against major world currencies thus far in 2005 has resulted in inflation growth of only 0.4% in the first two months of the year.
On the earnings picture, we remain relatively optimistic. While a number of stocks have already weighed in strong, helped by a healthy overall economic environment, aggregate profit growth for the market is expected to narrow from its exceptionally high level thus far. 35 companies announced earnings during April, showing an aggregate growth of 87.4%. A number of investment companies reported outstanding 1Q earnings, stoking a broad-based rally in the sector amid a continued positive outlook for 2005. Bayan Investment Co stole the show, announcing whopping profits of KD33.4mn as compared to KD1.6mn the previous year. Accordingly, Bayan's shares rocketed higher by 48%. Other investment stocks in the limelight included KAMCO (+64.7%), International Investments Projects (+61.3%) and International Investment Group (+37.3%).
However, non-Kuwaiti sector stocks dominated sectoral gainers during the month, led by a surge in cement and investment stocks. Shuaa Capital headed the sector and the market, climbing 70.4% during the month on strong full year earnings expectations. Shuaa didn't fail to impress, announcing a 206.0% growth in profitability. Gulf Finance House was also in focus, appreciating by 22.8% on similar earning expectations and news that GFH was approved by the Jordanian government to execute a project worth nearly US$500mn. Expectations were also boosted by news that the company profited KD9mn from the sale of a number of land plots in both Bahrain and UAE, to be incorporated in first half earnings.
Cement stocks also saw strong buy-side demand. Um Al Quwain Cement Industries Co headed cement producers during the month, rising by 30.1% on news that the stock will be listed in UAE in the coming month. Fujairah Cement Co also produced smart gains of 16.0% on similar news, with the stock expected to list in UAE in early May. Fujairah solidified the positive outlook by announcing 1Q earnings growth of 127.4% beating market expectations.
Although the market headed higher, breadth was awkwardly skewed in favor of gainers 66 to 61, with a large number of stocks ending lower mainly on account of technical adjustments post-dividend distributions instead of sell-offs. Highlighting the upbeat mood of investors has been strong trading activity. Although both the volume and value of shares traded fell short of March's peak level, it still remains at par with the record levels which we had seen in 2003. The volume of shares traded reached 5.06bn shares while the value shares traded remained elevated at KD2.8bn, averaging a daily value of KD142.1mn. In fact, Kuwait hit a milestone level in terms of value of shares traded during April, specifically on April 26, when the market saw an unprecedented level of nearly KD200mn in cash exchange hands.
But despite several months of solid returns, a pullback from the market seems unwarranted for May, although we expect a mild correction by mid-month. Investors are beginning to feel the pinch as the rally of recent months means that there are fewer cheap names to pick from with only a few stocks still on the bargain counter. Widespread buying interest and heavy volumes should continue though, amid hopes that the solid round of first quarter earnings will continue to build on the positive sentiment. Further gains will be driven by these strong corporate profits and abundant cash flow.
Value Leaders (US$) Volume Leaders
Bayan Investment Co. 938,517,123 Kuwait Projects Co. (Holding) 361,050,000
The Public Warehousing Co. 633,955,068 Bayan Investment Co. 244,262,500
National Investments Co. 452,156,507 Al-Mal Al-Kuwaiti Co. 235,210,000
Kuwait Financial Centre 360,287,158 International Investment Group 234,960,000
Kuwait Projects Co. (Holding) 353,337,329 Kuwait Financial Centre 221,325,000
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Global Investment House
© Press Release 2005
