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The latest research report from Kuwait Financial Center S.A.K. (“Markaz”) dwells on asset allocation for GCC stock markets. The research recommends asset allocation to all the GCC stock markets based on a model developed in-house. Historical back-testing during the last five years has yielded consistent out performance. As per the report, allocation to Saudi Arabia at 28% is lower than the market cap weight of 56%. This is the only market with a lower allocation. Currently, GCC equity fund managers (22 managers) have average allocation of only 19% to Saudi Arabia. Kuwait enjoys an allocation of 29% against a market weight of 19%. Fund managers have allocated 28% of money to Kuwait and this allocation is in line with the research recommendation. For UAE, the research recommends an allocation of 21%, against benchmark allocation of 14% while for Qatar the recommended allocation at 12% is higher than 8% benchmark allocation. Fund managers on an average allocated 6% to Oman even though benchmark weight is only 1%, implying bullish sentiment for Oman. Similarly Bahrain allocation by fund managers at 4% is also significantly higher than the 2% benchmark allocation. Overall, the research recommends a cash allocation of 7% and equity allocation of 93%. Market Review: Saudi has continued to witness a decline in the month of April. The YTD decline is -6.42% and in the month of April alone the TASI witnessed a decline of 3%. The decline can be primarily attributed to the corporate results which were announced during the month of April. In the heavy weights, SAMBA, Al-Rahji and Saudi Telecom witnessed a decline in their bottom lines by 11, 11 and 20% respectively. This led to the share prices of these companies decline by 6, 15 and 7% respectively. On an overall basis, of the 55 companies, that announced their results and those which are tracked by Markaz witnessed a decline in the consolidated bottom line by 2%. The Saudi index continued its decline even though SABIC came out with good numbers for 1Q07. SABIC witnessed its bottom line grow by 50% on a YoY basis to USD 16.74 Bn. The sentiment in the markets was also hurt by the results of an investigation announced in April by the Saudi CMA. The investigation has identified over 80 local companies accused of cheating, or buying shares from the Saudi bourse using insider information, or that have refused to announce their actual profits and engaged in fraudulent acts. The corporate numbers in Kuwait continue to show robustness in the economy. MTC and KFH have witnessed a growth of 34% and 37% in their bottom lines respectively. NBK also witnessed a growth of 13% in its Q107 profits on a YoY basis. Ex-Kuwait Projects Company, the rest of 25 companies have witnessed a consolidated growth of 36% for 1Q07 on a YoY basis. Apart from corporate numbers, the merger scenario continues to fuel the markets. Agility acquired two US based firms, two firms in the ANZ region and also a company in Egypt. On the other hand, the CBK acquisition is gaining steam with almost 4 firms submitting their bids during April. We expect more corporate numbers during the month of May. The Dubai index has been the worst performing index till March with a YTD return of -22%, the index had lost 85% of its value since the beginning of 2006. There was a good amount of M&A activity which failed to trigger a rally in the markets. However, the corporate results during the month of April started triggering a fresh rally. The markets gained some of the lost ground and increased by 5.23%. The biggest merger so far between banks in GCC was announced in March between Emirates Bank International (EBI) and National Bank of Dubai (NBD). The merger is expected to create a bank with a total asset size of approx USD 44976 Mn, which is 8% larger than the largest bank in GCC. However, this failed to cheer the stock prices of both these banks in the month of April. The acquisition activity continues to be good with Emaar and Etisalat leading the pack. The corporate numbers announced so far has been robust. There are 21 companies which have announced their Q107 earnings so far. The consolidated growth in the bottom line has been 12.70% on a YoY basis. Of the major companies, Etisalat witnessed a growth of 37% in its bottom line by adding 5.78 Mn subscribers in Q107. Qatar (DSM) witnessed a decline of 4% during the month of March, thereby provided a return of -15% YTD till March. However, the indices have started gaining momentum in the month of April. In April the DSM index gained by 7.70% to recover some of losses suffered in the previous three months. Most of the gains in the index can be attributed to Qatar National Bank, which gained 19% during the month. The bank reported its Q1 earnings during the month of April, with a growth of 7% in profits to USD 1.7 Bn. The overall corporate performance has also been robust in Qatar with the consolidated earnings of 24 companies witnessing a growth of 18.59%. The overall corporate numbers in Oman and Bahrain continue to be robust. The consolidated earnings of companies in the Bahrain and Oman markets have grown by 31% and 40% respectively. The Oman market performance can be mainly attributed to the growth of BankMuscat earnings for 1Q07. The bottom line of the bank witnessed a growth of 43.85% to record a profit of USD 50.66 Mn. About Markaz Kuwait Financial Centre 'Markaz', with total assets under management of over KD1.16 billion as of March 31, 2007, 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 was recently awarded a BBB+ corporate rating by Capital Intelligence Ltd.