Mirroring global financial market developments, March 08 was a punishing month for GCC when the MSCI GCC index declined by 7.7%. Saudi Arabia led the losers with a whopping fall of 11.24% as compared to a gain of 6.37% in February’08. All GCC markets, except Kuwait, recorded a decline during March-08. The Kuwaiti market significantly outperformed other GCC markets and posted a monthly return of 2%. Volatility, which eased a bit in the month of February after a spike in January, showed a mixed trend in March. Volatility On the volatility front, the GCC markets exhibited a mixed performance in the percentage of volatility. Saudi Arabia, Qatar and Oman registered a fall in volatility, while others like Kuwait, Bahrain and the UAE recorded a rise. Kuwait witnessed the highest spike in volatility as compared to the rest of the GCC markets. The GCC markets volatility levels were lesser than that of the emerging market volatility levels. The MVX of GCC is at 1560 as compared to MVX EM at 2571 and MVX S&P 500 at 2633. Among the GCC markets, Dubai is the most volatile market with the MVX at 3683, a tad lower than China. Market Review The GCC markets have exhibited significant swings since January 2008. Markets started the year on a weak note but showed signs of recovery during February. However, they tumbled again in March. All GCC markets except Kuwait witnessed a decline during the month. While Saudi Arabia led the pack with a 11.2% decline, the Qatari market fell 8.8% in March 2008. Kuwait was the only market in the GCC region to witness an increase in the first three months of 2008. As a result, on an YTD basis, it outperformed all other GCC markets with a return of 13.8%. The Kuwaiti market was closely followed by the Omani market, which returned 11.8% YTD. While Kuwait made the highest contribution to the total volume traded, Saudi Arabia topped the chart in terms of value traded in the region. Indicators M. Cap (USD Bn) Last Close Mar 08 % YTD % 07 % P/E 07 P/E 08 Saudi (TASI) 488 9,135 -11.24 -18.26 40 20 15 Kuwait (KSE) 213 14,288 1.99 13.77 25 13 11 Abu Dhabi (ADI) 116 4,556 -5.38 0.10 52 17 12 Dubai (DFMGI) 103 5,352 -10.21 -9.78 44 22 - Qatar (Doha SM) 105 9,555 -8.76 -0.27 34 17 10 Bahrain (BAX) 29 2,790 -3.16 1.26 24 8 7 Oman (Muscat SM) 26 10,103 -2.51 11.81 62 13 11 MSCI GCC 659 720 -7.71 -10.30 47 19 NA Source: Excerpt from Markaz “Daily Morning Brief” March 1, 2008 CY08 Estimates are Markaz Earnings Estimates Saudi Arabia March proved to be another weak month for the Saudi market in 2008. Low volumes failed to sustain the recovery of February and the market plunged 11.2% on a MoM basis in March. On an YTD basis, the Saudi market continued to significantly underperform the remaining GCC markets and lost 18.3%. Total volumes in the market declined 19.8% to 4,242 Mn in March from 5,290 Mn in February. Samba witnessed the highest decline among the heavy weight stocks during March at -24%, taking its YTD losses to 37%. The PE contraction too has been quite significant. As at 31st Dec 2007, the stock was quoting at 22.44x its last twelve month earnings (LTM) and this has fallen down to 14.07x. The stock has witnessed a decline in spite of the news flow being positive. The company announced its plans for expansion and expressed interest in acquiring 67% stake in Egypt’s Banque Du Caire. The other major losers in March included Al-Rajhi bank, Saudi Telecom and Sabic which declined by 19%, 15% and 11% respectively. Saudi Telecom Co plans to spend about USD15 Bn in acquiring firms and licenses outside its home market in 2008. Kuwait In March, the Kuwaiti market posted positive but mediocre returns of 2% and outperformed all other markets in the GCC region. In terms of YTD returns, it was the best GCC market with gains of 13.8%. Aref Energy Holding and Mena Holding Group led the market and were the top gainers in the month with returns of 117.8% and 96.1%, respectively. Both volume and value traded were higher than the twelve-month average for the month of March. Relatively, the concentration of the top five in terms of market cap and volume remained lower than other markets. On the blue chip front, Mobile Telecommunications Co (ZAIN) prepared for an IPO in Bahrain that is likely to be announced before the end of June 2008. During March, National Bank of Kuwait (NBK) acquired 40% stake in Turkish Bank. However, the stock was down 6.6% during the month. Kuwait Finance House was planning to expand its operations in China, India, Indonesia and Algeria. However, the stock lost 9.2% during the month. Agility’s full-year net profit was KD153.9 Mn (USD576.4 Mn) and posted a 10.5% fall in fourth-quarter profit of KD34.9 Mn. The Company’s stock price fell 15.9% in March. Heavyweight National Industries Group (NIND) also posted a loss of 13.4% during the month after returning 3.2% in February. UAE The decline in UAE markets comes on the back of low volumes and value traded on the bourses. The volumes fell by 45% as compared to Feb’ 08. It has to be noted that in Feb’ 08, both ADSM and DFMGI witnessed 5.71% and 5.62% increase respectively. The top five stocks contribution to the market volumes too reduced from 69% in Feb’ 08 to 62% in March’ 08. Among the front line stocks, Emaar properties witnessed a decline of 13%. The stock as at the end of Mar’ 08 was trading at 10.18x its trailing twelve month (TTM) earnings. This is almost at a 50% discount to its last 2 year average PE discounting the TTM earnings. The other biggest decline in the UAE market during Mar’ 08 was that of DIB, which fell by 15%. During the start of the month, the bank announced the results of its wholly owned subsidiary Dubai Islamic Bank Pakistan. The results were strong with a 152% growth in assets and 273% growth in deposits. Qatar The Qatari market posted a MoM loss of 8.8% in March as against returns of 10.4% in February. This was the worst MoM performance since January 2007, when it had registered a loss of 9.8%. Liquidity, in terms of volume and value traded, was low in March 2008 compared to the trailing twelve-month average. On an YTD basis, the market recorded a loss of 0.3%. This was due to the poor performance of heavyweight stocks, as the top five stocks (in terms of market capitalization) posted losses in the month. Qatar telecom and Industries Qatar declined by 16%. Qatar telecom’s Oman unit Nawras announced plans to invest RO100 Mn in 2008 and also short listed two banks advice on a possible IPO. The news flow on Industries Qatar was also positive with the company announcing major expansionary projects. The expansionary projects are valued at QAR 20 Bn ($5.5 Bn) and is expected to boost production capacity of Qafco 5 to 3.8 million tons of ammonia and 4.3 million tons of urea. Oman After posting MoM positive returns for the 11th consecutive time till February, the Omani market posted a negative return in the month of March. Consequently, its YTD returns decreased to 11.8% from 14.7% in February 2008. In March, the total volume traded increased 24.1% to 397 Mn, while the total value traded rose 25.5% to USD837 Mn. Among the top five heavyweights, Bank Muscat (BKMB) registered a 39.4% increase in net profit to RO84.2 Mn in 2007 from RO60.4 Mn in 2006. However, the BKMB stock fell 9.7% during the month. Bahrain The Bahraini market recorded a loss of 3.2% in March compared to returns of 2.9% in February. It registered 1.3% returns YTD. Liquidity, in terms of volume and value traded, declined by 41% and 65% respectively on a MoM basis. The weak stock price performance of heavyweight banking stocks such as Al Ahli United Bank (AUB) and Arab Banking Corp (ABC) pushed the market down. ABC continued to be a victim of sub-prime mortgage crisis, which led to a 38% plunge in its full year net profits. The stock price fell by 34.1% during the month. Investcorp acquired Randall-Reilly Publishing Company, LLC, a media and information company focused on the trucking and construction markets in the US. United Gulf Bank agreed to buy a stake in Dubai Islamic Bank unit, Millennium Finance Corporation, in line with its expansion plans. Heavyweights such as Gulf Finance House (GFH), and Bahrain Telecommunications Company (BATELCO) also took a hit of 13.9% and 4.0%, respectively. ### Kuwait Financial Centre 'Markaz', with total assets under management of over KD1.4 billion as of December 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.
GCC markets decline inline with Global markets. High volatility levels witnessed in Global markets