Kuwait Financial Centre “Markaz” recently released its Monthly Market Review report for the month of January 2023. Kuwait’s All Share Index witnessed a marginal decrease in January, posting a monthly loss of 0.2%. Among Boursa Kuwait’s sectoral indices, Telecommunications and Banking sectors gained the most at 1.4% and 1.1% respectively, while the Industrials sector lost 9.2% for the month. Among Premier Market stocks, ALAFCO and Kuwait International Bank gained the most for the month, rising by 5.4% and 3.6% respectively. Agility and Jazeera Airways fell the most for the month at 17.9% and 14.7% respectively.
Central Bank of Kuwait raised its policy rate by 50 bps from 3.5% to 4.0% in January, a few days ahead of the scheduled monthly meeting of the U.S. Fed. According to forecasts by the United Nations, Kuwait’s real GDP is expected to grow at 2.8% while the country’s inflation is estimated at 3.2% in 2023. Kuwait’s inflation (CPI) eased in the month of December to 3.15% y/y, which was mildly lower compared to November at 3.18% y/y. Fitch has affirmed a stable outlook on Kuwait with a credit rating of AA-, citing exceptionally robust fiscal and external balance.
Regionally, GCC Markets were mixed with S&P GCC composite index, rising 1.7% for the month. The Abu Dhabi equity index decreased the most, losing 3.9% over the month, primarily driven by the sharp decline in the country’s largest lender - First Abu Dhabi Bank, whose Q4 earnings were below market expectations. Saudi Arabia and Qatar indices gained the most, rising 3.0% and 2.4% respectively for the month on the back of slightly higher than expected earnings results from blue-chip companies.
World Bank has revised its 2023 GDP outlook for the UAE upwards to 4.1%, underpinned by strong growth in the non-oil sector. UAE PMI dropped to 54.2 in December 2022 from 54.4 in the previous month, marking the lowest reading since January 2022. According to the Securities and Commodities Authority (SCA), UAE has 11 IPOs in the pipeline worth more than AED 8 billion, following a record year in 2022 from an IPO perspective. Inflation in Saudi Arabia increased by 3.3% y/y in December 2022, majorly driven by the increase in housing rents. Saudi Central Bank (SAMA) has proposed to launch open banking services in Q1 2023, which is expected to boost the country’s banking and financial services sector. Qatar’s inflation surged to 5.9% y/y in December 2022, its highest level since September 2022. The increase was driven by recreation and hospitality segments, which were boosted by the FIFA World Cup 2022 held in the country.
Developed markets’ performance was positive during January with MSCI World and S&P 500 gaining 7.0% and 6.2% respectively. Economic data on moderating inflation and the anticipation of a short-lived recession in the near term bolstered positive sentiment among the investors. U.S. Core CPI rose 5.7% y/y during December, the slowest increase in the year. U.S manufacturing output declined by 1.3% m/m in December. Eurozone's CPI rose 9.2% y/y in December, which was lower than market expectations. European Central Bank (ECB) has affirmed its stance to continue the interest rate hikes to keep inflation under control. U.K inflation increased 10.5% y/y in December. MSCI EM index gained 7.9% for the month. Chinese equities were positive in November owing to the ease of COVID-19 restrictions in China. The country’s GDP expanded by 3% in 2022, beating the consensus estimates.
Oil prices marked a decline of 1.7% in January 2023, due to indications of strong oil supply increase from Russia. The strong supply forecasts have offset the increase in oil demand from China and possible slowdown in the pace of interest rate hikes by the U.S Fed. According to the IEA, oil demand from China is expected to remain high in Q3 and Q4 2023, while oil supply is anticipated to be tight. Gold prices rose 5.7% in January to 1,928 $/oz on account of moderating inflation in the U.S. coupled with the weakness in U.S. Dollar.