GCC losses expand in August


GCC markets tumbled on global cues during the month; S&P GCC lost 5.12% as Saudi tumbled 6.46% for the month. Kuwait’s weighted index followed with a loss of 3.4%. All markets were in the red; the least decline was a 0.67% loss on the Abu Dhabi exchange which is the best performing GCC index for the year thus far.

News in the region included:
  • Saudi inflation was up to 4.9% in July (the largest monthly jump since 2008), although a moderate increase from the 4.7% registered in the previous month; inflation is being closely monitored given large scale funding and social welfare programs enacted during the year.
  • According to a statement by the State’s ruler, misuse of Kuwait's state budget surplus, including unproductive spending, has led to structural imbalances in the economy. The state posted a budget surplus of USD 19.4 bn in the 2010/11 fiscal year, a decline of 38%.
  • The Qatar central bank cut interest rates to 4.5% to further boost loans growth; total lending was up 14% YoY in July boosted by the trade and real estate sectors.  

Liquidity was down again in August; GCC value traded declined 15% to USD 17.76 bn while volume was down 6% to just 6.65 bn. Saudi and Kuwait saw value traded decline by 21% and 14%, respectively. GCC Value Traded in the YTD period is at USD 232 bn.

Risk in the GCC (as measured by the Markaz Volatility Index – MVX) was up just 28% in August after expanding 1% in July. The highest jump was in MVX Qatar, which doubled, while MVX Kuwait was down 16%.

Global Markets review

Monthly returns were highly negative across the board; the worst performance came from MSCI Europe, tumbling 10.4% for the month. Shanghai and Frontier Markets saw the least losses, shedding 5% and 5.2%, respectively, during August.

Monthly Returns

World markets tumbled under pressure from continued economic issues in the US in addition to the impact of the 5th August S&P downgrade of US credit. Mid-month saw Fitch affirm the US rating while awarding it a ‘Stable’ outlook versus ‘Negative’ calls from S&P and Moody’s. Also during the month, Moody’s downgraded Japan’s government debt by one-notch to Aa3, with a ‘Stable’ outlook, due to a build-up of debt since the 2009 recession.

Signs of flagging US demand and progress in Libya brought crude oil prices down 2% in August with a YTD gain of 24%. Conversely, the uncertainty has been a boon for Gold; the precious metal saw its highest monthly gain in 21-months, up 13% in August to close at $1,826/oz.

The broad World index tumbled by 7.3% in August bringing the YTD loss to 4%.

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Kuwait Financial Centre S.A.K. 'Markaz', established in 1974 with total assets under management of over KD 906 million as of June 30th, 2011, is the leading and award winning asset management and investment banking institution in the Arabian Gulf Region. Markaz is listed on the Kuwait Stock Exchange (KSE) since 1997 under ticker Markaz.