Kuwait 02 November 2008 - In a recently published monthly report by Kuwait Financial Centre "Markaz", which aims to analyze the performance of equity funds across the region, it is stated that, So far, September has been one of the worst volatile months for the GCC markets in 2008. Markets across the globe plunged sharply during the month; GCC markets were affected as the ripple effect of the global crisis reached the region. The recent fall in oil prices added to the negative sentiment in the market. Total volume traded in the GCC markets increased 19.3% mainly due to higher trading activity in Kuwait and the UAE. Value traded in the region declined 9% in September. Despite strong fundamentals, the GCC markets fell prey to negative sentiment. On a weighted average basis, GCC equity funds recorded a massive loss of 15.0% in September compared to a loss of 9.0% in August.
Asset Allocation Trends- GCC Equity Funds (September 2008)
During September, fund managers decreased their exposure to equity by 1.85%. Funds decided to stay liquid--the free cash held accounted for 8% of total assets, the highest level in 2008.
In terms of geographical allocation, exposure to Saudi Arabia continued increased from 32.2% in August to 33.5% in September in spite of negative market performance. Saudi Arabia's Tadawul, which has lost 32.4% so far in 2008 (September 2008), provided a good opportunity for managers to enter the market. The Kuwaiti market also witnessed an improvement in confidence with asset allocators increasing their exposure to 22.7%. This represented the highest allocation to the Kuwaiti market since February 2008. However, allocation to the UAE markets fell to 21%, the lowest level, thus far, in 2008. Asset managers expect a slowdown in the real estate sector and the overall UAE economy. While allocation to Qatar rose to 13.7%, exposure to Other MENA markets fell to 3.6%.
Performance Trend of GCC Funds
Source: Markaz Research
Among conventional GCC funds, the preferred equity holdings were SABIC, Emaar Properties, Al Dar Properties, Arabtec Holding, and Industries Qatar. In September, 10 conventional funds had exposure to SABIC, while 6 funds invested in Emaar.
Saudi Arabia Equity Funds
The Saudi stock market was characterized by very high volatility during the month with the market reacting sharply to negative U.S. market sentiment. Markets deteriorated further on the news of Lehman Brothers' bankruptcy but picked up with the announcement of the bailout package by the government. The market witnessed widespread losses with all sectoral indices plummeting sharply, led by the Petrochemical, Investment and Construction segments.
On an asset-weighted basis, the Saudi funds that were tracked lost 19.1% during the month.
Several funds increased their cash reserves; therefore, the cash percentage of the tracked Saudi funds went up to 1.9% during September from 1.6% in August.
Kuwait Equity Funds
The Kuwait Stock Exchange registered its third consecutive monthly loss this month, declining by 11.1%. The Kuwait Stock Price index touched its lowest levels since May 15, 2007, this month, closing at 12839.3 points. Markets declined further due to the tightening of financial sector norms by the Central Bank of Kuwait (CBK) as well as the global financial turmoil, which further squeezed liquidity.
On a weighted average basis, funds continued their losing streak, declining by 12.2% in September versus 5.5% in August.
Among conventional funds, the top five equity holdings were Kuwait Finance House, National Bank of Kuwait, ZAIN, National Industries Group, and Kuwait Investment Company in that order. KFH and NBK continued as the most preferred stocks with 11 funds holding the stocks.
Qatar Equity Funds
Qatar's Doha Securities Market (DSM) declined 10.8% in September, the fourth consecutive loss. All sectoral indices, except the Services segment, reported double-digit losses.
Fund managers reduced their exposure to equity to 85.4% during the month, holding 14.6% of total assets as free cash. During the month, on an asset-weighted basis, Qatari equity funds lost 13.3%.
Other GCC Equity Funds
UAE Equity Funds - Stock markets in Dubai (DFM) and Abu Dhabi (ADX) fell as investors continued to sell stocks amid fears of a recession in the US and around the world. ADX and DFM continued to report double-digit losses of 10.3% and 13.3%, respectively, in September. Among sectoral indices, the Consumer Index (of the ADX) was the biggest loser in September with a monthly loss of 15.7%. The Utilities index (of DFM) lost 16.3% during the month.
On a weighted average basis, funds lost 16.6% MoM in September.
Oman Equity Funds - The MSCI Oman index recorded further losses during September owing to the ongoing global financial market turmoil and continued FII selling in the Omani market. The FII selling, which started mid-June, has only intensified since then and severely impacted retail investor sentiment. The Banking & Financial and Industries sectors fell 10.4% and 10.6% MoM, respectively, during the month. In line with the market, Omani funds recorded an average asset-weighted loss of 10.9% in September.
Bahrain Equity Funds - The MSCI Bahrain index lost 13.5% MoM during the month of September. This was the index's third consecutive month of losses. Furthermore, Bahraini equity funds posted a weighted average loss of 9.0% MoM during the month. However, funds significantly outperformed the MSCI Bahrain index.
-Ends-
About Kuwait Financial Centre "Markaz"
Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of over KD 1.4 (USD 5.32 billion) as of June 30, 2008, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997; and has been awarded a BBB+ corporate rating by Capital Intelligence Ltd.
For further information, please contact:
Mariam Al - Suwailem
Senior Media & Communications Officer
Kuwait Financial Centre S.A.K. "Markaz"
Tel: +965 224 8000 ext 1817
Fax: +965 241 4499
Email: msuwailem@markaz.com
© Press Release 2008
