Global Investment House –Kuwait- Kuwait Stock Exchange -Market Performance
Global Investment House –Kuwait- Kuwait Stock Exchange -Market Performance –After recording good growth over past few months, there was a correction in Kuwait market in March-2008. During the month, many companies in Kuwait were traded ex-dividend pushing investors to change their positions after profit distributions. After recording a gain of 3.6% in February-2008, “Global” General Index reported a monthly decline of 5.1% as it ended the month of March-2008 at 402.50 points. The market capitalization reached KD62.41bn at the end of the month, registering a decline of 1.8% as compared to the previous month.
The Central Bank of Kuwait (CBK) has brought about a few changes in the banking system regulations related particularly to the retail banking segment (consumer and installment loans). These changes, effective from March 30, 2008 on incremental loans, include among others: limiting banks from lending consumer loans exceeding more than 40% of the borrower’s salary, down from 50%; and reducing the lending spread over the discount rate to a maximum of 3%, down from 4%.Increasing inflation may be quoted as one of the major reasons behind the CBK’s recent move whereby regulations have become tightening by restraining the banks’ lending or in other words by clipping the borrower’s borrowing capability. Albeit this may provide some relief to the high inflation levels, inflation may nevertheless require more aggressive steps given the fact that domestic burgeoning property rentals and global rising food and commodity prices have been the major reasons behind Kuwait’s inflation.
The overall trading activity during March-2008 was higher compared to the previous month. Volume of shares traded on the bourse witnessed a monthly gain of 11%, aggregating to 8.23bn shares in the month. Simultaneously, value of shares traded on the bourse witnessed a monthly gain of 13%, aggregating to KD3.94 in the month. Zain was the top value leader for the month with 126.6mn shares changing hands at a value KD308.8mn. Al Safwa Group Company was the top volume leader for the month with 905.3mn shares changing hands at a value KD199.0mn.
For the month of March-2008, maximum decline was seen in Global Services Index (-9.9%). Among components of Services Index, Agility lost 15.9% during the month to reach KD1.160. Agility and Industriaplex Inc., a next generation B2B service provider, have formed a strategic alliance with Agility’s acquisition of a 10.82 percent equity stake in the company. Industriaplex, based in Atlanta, Georgia, is a global sourcing, equipment distribution, and facility services company that provides integrated supply, installation and maintenance solutions. Moreover, Agility said that it has won a contract worth as much as US$450mn to transport supplies into Iraq. The contract is for one year, and extendable for another two. The deal is shared with four other unidentified companies.
Zain lost 11.04% during the month to reach KD1.800. Zain has informed that trading of shares in its Saudi affiliate, whose IPO was oversubscribed by 183 percent, has started on March 22, 2008. More than eight million Saudi nationals offered SR17.83bn towards the initial public offering of the kingdom’s third mobile-phone company. The shares were sold at SR10 each. The company sold 700mn shares to the public and 70mn shares to state-run Public Pension Agency. Kuwait’s Zain owns 25 percent of the Saudi firm, which plans to start operations in the middle of the year.
During the month of March-2008, Global Banking Index was down by 7.1%. Among banking sector components, Commercial Bank of Kuwait (CoBK) lost 4.9% during March-2008 to reach KD1.540. CoBK has bought local brokerage Al-Ittihad Financial Brokerage Company for KD11.1mn. CoBK bought another 10.8mn shares for KD1.025 each from local investment firm Securities House, bringing its stake in the brokerage to 51 percent.
The Central Bank of Kuwait had granted Al-Rajhi Bank an initial license to open a branch in the state, allowing it to become the first Saudi bank to operate in Kuwait. The move makes Al-Rajhi, which is Saudi Arabia’s leading bank that operates on the principles of Islamic Sharia law, the fourth Gulf and Seventh foreign bank to obtain a permit in the oil-rich GCC state. The decision must still be confirmed by the Kuwaiti government.
Kuwait Stock Exchange (KSE) approved the listing of Bahraini Ithmar Bank on March 31, 2008 under the Non-Kuwaiti sector. The bank has a paid-up capital of US$543.62mn at a par value of US$0.25 per share. The bank undertakes all its banking services according to Sharia Islamic laws and is listed on the Bahrain Stock Exchange as well. The bank achieved a net profit of US$188.31mn for the financial year ending in December 2007 with an EPS of US$5.79 compared to a net profit of US$181.05mn and an EPS of US$11.1 recorded in 2006. After this listing, the total listed companies under the regular Kuwaiti market have increased to 196.
Though we have seen decline in the Kuwait market which is partly attributed to political uncertainties prevailing in Kuwait after resignation of the cabinet, we expect the market to firm up in coming months on the back of new positions to be taken up by investors.
Volume Leaders (Shares) Number of Shares Traded
Al Safwa Group Company 905,260,000
National Ranges Company 509,940,000
Ekttitab Holding Company 438,530,000
Sokouk Holding Company 256,740,000
Iraq Holding Company 240,960,000
Value Leaders Value Traded (KD)
Zain (MTC) 308,795,590
Kuwait Finance House 202,182,960
Al Safwa Group Company 199,046,000
National Bank of Kuwait 130,485,700
Al-Abraj Holding Company 128,640,400