Global Investment House – Kuwait Stock Exchange Performance

The selling spree in the Kuwaiti market continued during the month of March. Even the excellent 2005 corporate earnings numbers and the prevailing high oil prices could not save the market tumbling for the second consecutive month as investors engaged in heavy profit booking. The benchmark “Global” General Index was down by 11.73% to end the month at 283.02 points, the biggest loss witnessed in the last 15 months. All the “Global” sector indices were in the negative territory at the end of the month. Overall, the index reported YTD loss of 11.62% at the end of March-2006. The market cap. of the stock exchange reached KD37.68bn, a loss of 10.86% compared to the previous month. Kuwait Stock Exchange price index dropped below the psychological 10,000 point mark for the first time in last six months ( it breached the 10,000 point mark in September 2005) and ended the month at 9,896.7 points, reporting a monthly decline of 14.26%.

According to the latest report from the Ministry of Finance, <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Kuwait posted a record revenue of KD12.4bn (US$42.6bn) in the first 11 months of the fiscal year. The revenues reported so far is the largest in Kuwait's history and likely to increase further in the full year. Kuwait reported revenues of US$27.4bn in the fiscal year 2004. The sharp increase in the revenue can be attributed to rise in both the Kuwaiti oil prices and production.

The volume and value of shares traded on the bourse were higher than the previous months as the market witnessed huge selling pressures. The volume of shares traded increased by 10.84% as compared to the previous month, aggregating to 3.18bn shares traded on the bourse. The value of shares traded also witnessed an increase of 6.11% over the previous month amounting to KD1.66bn during the month. We think that the market will continue to break out of the range bound trading which has been occurring in the past three months, driven by the repositioning of investor funds in preparation for the first quarter earnings season.

The market breadth was clearly in favor of decliners, with 126 decliners and 19 stocks reporting a monthly increase, while 16 stocks remained unchanged. However, despite the weakness in the market, 5 stocks managed to  register more than ten per cent monthly gains. The biggest gainer during the month was Al Madar Finance and Investment Company (+31.3%), followed by Transport and Warehousing Group (+21.0%), Injazzat Real Estate Development (+11.5%) and Credit rating and collection company (+10.5%). The biggest losers during the month were International Investment Group (-49%), followed by Grand Real estate Co. (-46.2%) and International Investments Projects Co. (-42.7%).

Stocks in the investment sector also took a cue from the market as 36 stocks reported monthly decline out of the 39 listed companies. Kuwait Investment Company (KIC) announced its intention to convert its brokerage office in the Kuwait Stock Exchange (KSE) into a full service brokerage firm with a capital of KD20mn (US$68.13mn) in the next 3-4 months. In addition to KIC, other individual and institutional strategic investors will hold stakes in the new company. KIC also reported an earnings growth of 164.7% from KD20.06mn in 2004 to KD53.09mn in 2005. Despite of these positive developments from KIC, the stock price declined by 25.4% to 470 fils.

The Investment Dar (TID) hogged the limelight during the month of March. The company announced its intention to establish a new Islamic investment company in Saudi Arabia with a capital of SR600mn (US$160mn). TID will also establish Syria’s first Islamic bank in cooperation with Kuwaiti, Saudi and Syrian investors during the year 2006. TID’s earnings improved by 198.69% to KD80.49mn in 2005 as compared to KD26.95mn reported in 2004. However, these positive news flow  by TID could not elevate the stock prices, as it declined by 3.3%.

The banking sector declined by 3.01% during the month. Although the banks have reported healthy annual earnings growth, five out of the eight listed bank’s stock price declined during the month. Kuwait Finance House (-20.8%) was the biggest loser during the month, followed by Burgan Bank (-14.5%) and Gulf Bank (-13.7%). On the corporate front, Commercial Bank of Kuwait (CBK) announced that it plans to launch two investment funds in the second quarter of  2006. The first fund will be established in Kuwait, while the other fund will be launched in the Far East. The stock price of CBK declined by 4.9% to KD1.160.

The market added one new company during the month, further improving the depth of the market. Jeeran Holding Company was listed under the service sector, which increased the total number of listed companies to 161. So far, 3 new companies have been added to the market in 2006. The market has corrected by around 12% in March and we believe the market will pull back on healthy first quarter earnings around the corner. However, we don’t expect sharp rally from the market in the month of April until and unless government announces some packages for the capital markets. Investors can gain from some select stocks which have been battered heavily in the last two months and undervalued from the medium term perspective.

Value Leaders  (in KD)

Volume Leaders