GCC rocks and rolls in October 07- Dubai records 25%. Kuwait taking rest


The GCC markets registered strong performance in October after posting mediocre returns in September. The UAE, Qatar, Oman and Saudi Arabia delivered double-digit returns during the month, whereas Kuwait was the only market to register subdued performance. Of the six GCC markets, Saudi Arabia emerged as one of the best turn around stories in the GCC region during October, after posting bleak performance in September 2007. The market gained 10.06% in September after declining 4.78% the previous month. Consequently, it ended the month with a YTD return of 8.67%. Market Review - October 2007 Indicators M. Cap (USD Bn) Last Close Oct 07 % YTD % 06 % P/E P/B Saudi (TASI) 379 8621 10.06 8.67 -58 15 4 Kuwait (KSE) 196 12767 -0.64 26.82 -15 19 3 Abu Dhabi (ADI) 103 4272 20.06 42.40 -35 15 3 Dubai (DFMGI) 108 5279 24.73 27.91 -63 15 3 Qatar(Doha SM) 84 9417 16.31 32.03 -36 16 3 Bahrain (BAX) 26 2649 4.11 19.43 -5 12 2 Oman(Muscat SM) 19 8021 14.81 43.71 2 13 3 Source: Excerpt from Markaz “Daily Morning Brief” dated Nov 01 2007. The UAE markets were the best performing markets in the GCC region in the month of October with a return of 20%. The Abu Dhabi index ended 20.06% higher, whereas the Dubai market delivered 24.73% returns in October. The rally was led by heavyweights such as Emirates NBD (48%), NBAD (24%), EMAAR Properties (21%), and DIB (20%). Surprisingly the largest capitalized company Etisalat stayed flat. October was a busy month in terms of mergers and alliances. Following the listing of the merged entity, Emirates NBD, the scrip rose 48% in the month. Emirates Telecommunications Corporation picked up an additional 17% in Zanzibar Telecom Limited, taking its total in the company to 51%. Gulf Pharmaceutical Industries announced its decision to enter into a joint venture with a 40% stake to establish a new company specializing in pharmacies management. For Saudi Arabia, the top five stocks (in terms of market cap) recorded healthy returns during the month due to robust corporate earnings in Q307. SABIC, the leader in terms of market capitalization registered 18% increase in its share price in October. The YTD performance for SABIC stands at 41% with a p/e ratio of 14. It is noteworthy to mention that the stock’s gain for the year comes on the back of 63% loss suffered during 2006. SABIC results for 9 months ending Sept 07 shows a profit growth of 45%. SABIC is planning to build two petrochemical projects in China at a total cost of SR7.5 Bn. Among other heavy weights, Saudi Telecom and Al-Rajhi Bank increased by 8% & 9% respectively while Kingdom Holdings increased by 7% Expansion initiatives announced by major companies during the month included Saudi Electricity Company’s plans to develop two power plants in Saudi Arabia. These plants are expected to add over 3000 megawatts to the country's power grids. Qatar too witnessed a strong rally. Qatar (DSM) ended 16.31% higher during the month, following the 8.19% rise in September. This was driven by strong corporate results in Q307. Qatar was the second-best performing market in the GCC region, as heavyweights such as Industries Qatar, Qatar Commercial Bank and Qatar Islamic Bank ended on a positive note. However, the lime light was stolen by Oman. The Muscat Securities Market (MSM) posted a monthly gain of 14.81% and this return resulted in pushing Oman to the best performing market in the YTD period in the GCC with a staggering 43.71% appreciation in the MSM index. The bullish sentiment was felt even in the IPO segment. Galfar’s IPO, which witnessed a oversubscription of 14.81 times, commenced trading on the Muscat Stock Exchange with a big positive gap. On the corporate front too, the positive news flow supported the market movement. Oman Telecommunications gathered momentum with the acquisition of a majority stake in Worldcall (Pakistan). However, the dampener to the GCC markets this time around was Kuwait. It has to be noted that, till September, Kuwait had a strong run up and during October, the price index of Kuwait lost some of its gains. The Kuwait price index closed the month of October with a decline of 0.64%. This decline and a flat month in September resulted in Kuwait losing out its best performing market status to UAE. Heavyweights such as MTC and AGILITY ended lower, declining 8% and 13%, respectively, during the month. NIG was the top performer in the top five stocks (by market cap), as it advanced by 7% during the month. The company is planning to hike its capital to KD200 Mn and also invest KD800 Mn to finance its growth plans. NIG posted a growth of 112% in profits for the period ending Sept 07. Performance of GCC Equity Funds (September) GCC funds registered strong performance in September 2007. Of the 21 GCC equity funds tracked by Markaz, 19 reported positive returns. Three ex-Saudi funds also delivered positive returns, bringing the total to 22. However, there is a big gap in the performance of the top performing Amanah GCC Equity Fund and the remaining equity funds. Funds that delivered best returns made higher allocations to Saudi Arabia and the UAE. Top five YTD returns & MSCI GCC Amanah GCC Equity Fund, managed by Saudi British Bank, spearheaded the performance table with 13.7% return in September 2007. This was the best-ever return posted by the fund since its inception in April 2006. The fund’s assets stand at USD 28 million. Gulf Equity Fund, managed by National Bank of Kuwait, was at the second position. This was despite the fact that the fund had allocated 38% of funds to Kuwait, which posted a loss of 0.64% in September. This fund managed to post 3% returns in September, as it allocated 17% and 11% of its equity portfolio to the lucrative markets of the UAE and Saudi Arabia, respectively. For the year, the top 5 funds delivered returns in excess of 25% with Amana GCC Equity Fund leading with a return of 32% followed by Vision GCC Fund (30%) and Markaz GCC Fund (28%). Our proprietary asset allocation model(tactical) increased by 8.23% for October, mainly on the back of over weight positions on Qatar and Oman. Qatar and Oman put together formed 15% of the equity portfolio and delivered 16.3% and 14.8% returns respectively. The TAA model continues to outperform the SAA on an YTD basis. Going forward, the model has raised its allocation to Saudi Arabia from 30% for October to 72% for November, indicating an overweight position. This is driven by strong returns during October 2007. The model continues to be Neutral on Kuwait. The model has increased the weightage assigned to the UAE to 18%. The model has reduced its allocation to Qatar from 13% in October to 11% for the month of November. ### About Markaz Kuwait Financial Centre 'Markaz', with total assets under management of over KD1.4 billion as of September 30, 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.