Kuwait Financial Centre “Markaz” recently released its Monthly Market Review report for the month of April 2023. Kuwait’s All Share Index witnessed an increase in April, posting a monthly gain of 1.3%. Among Boursa Kuwait’s sectoral indices, Insurance sector gained the most at 10.7%, while the Technology sector lost 8.5% for the month. Among Premier Market stocks, Gulf Cables and Electrical Industries Co. and Alimtiaz Investment Group gained the most for the month, rising by 16.0% and 14.9% respectively. Ali Al-Ghanim Sons Automotive Co. fell the most for the month at 4.1%.
Kuwait consumer price inflation (CPI) rose by 3.7% y-o-y and 0.7% m-o-m in March primarily driven by Food & Beverage prices, which jumped by 7.5% y-o-y and 0.7% m-o-m. Kuwait's real GDP growth is anticipated to rise by 0.9% in 2023 according to the IMF World Economic Outlook update from April 2023, much lower than the previous estimate of 2.6% in October 2022. Average inflation is forecasted at 3.3% in 2023, higher than the previous estimate of 2.4%. In terms of per capita GDP in terms of purchasing power, Kuwait has fallen in the rankings of the richest nations in the world, falling to 36th place out of 193 nations from 31st place in the previous year.
Regionally, GCC Markets have been positive, with S&P GCC composite index up 4.9% for the month. All equity indices, except Qatar and Oman ended positive for the month. Saudi markets rose by 6.8% for the month supported by the rating upgrade by Fitch. Fitch raised Saudi Arabia's rating from "A" to "A+," citing the nation's solid fiscal and external balance sheets, which include a favorable debt-to-GDP ratio and robust sovereign net foreign assets. Saudi Aramco and Saudi Telecom rose 12.4% and 10.9% respectively for the month. The respective moves were triggered by the upgrade of Saudi Aramco’s credit rating by Fitch to ‘A+’ from 'A’ and Saudi Telecom’s selling of its entire 49% stake in Contact Centre Co. Oman equity index decreased the most, losing 3.0% while Qatar equity index fell by 0.3% over the month.
The World Bank has updated its forecast for economic growth in the GCC for 2023 to 3.2% in April which is down from the earlier forecast of 3.7%. The real GDP of UAE is expected to increase by 3.9% in 2023 and 4.3% in 2024 according to the projections by the Central Bank of UAE. Even the IMF recently forecasted that the UAE economy will expand at a faster pace in 2024 at 3.9% as compared to 3.5% this year while downgrading the 2023 forecast by 70 bps from 4.2% in October 2022 to 3.5%. According to the World Trade Organization, the UAE's merchandise trade reached USD 1 trillion (AED3.67 trillion) in 2022 as exports and imports increased due to increase in economic activity. The S&P Global Saudi Arabia Purchasing Managers’ Index (PMI) was 58.7 in March, falling from an eight-year record high of 59.8 in February. Saudi Arabia's inflation slowed down to 2.7% y/y in March from 3% y/y in February, driven mainly by an increase in housing rents. Qatar is anticipated to produce a budget surplus of 6.5% in 2023 and 5.3% in 2024, according to the most recent World Bank estimate. Further, Qatar's real GDP will increase by 3.3 percent this year, and the current account balance would be 15.9% this year and 12.1% in 2024 as per the projections.
Developed markets’ performance ended mildly positive in April with MSCI World index gaining 1.6% and S&P 500 index gaining 1.5% despite companies registering poor earnings performance for Q1 2023. U.S. real GDP growth figures for Q1 2023 came in at 1.1% y-o-y, indicating a slowdown in the economy. U.S. Consumer Price Inflation slowed to 5% y-o-y in March, down from 6% y-o-y in February and was lesser than economists’ consensus prediction of 5.2% y-o-y. The service and the manufacturing activity in the S&P Global US Composite Purchasing Managers’ Index soar to its peak level of 53.5, which can be attributed to stronger demand, improving supply chains and strength in new orders. In the UK, CPI increased to 10.1% y-o-y in March compared to 10.4% y-o-y in February, driven mainly by escalating food and beverage prices. In the Eurozone, inflation fell to 6.9% in March from 8.5% in February y-o-y on the back of falling energy prices. However, the core CPI increased to 5.7% in March from 5.6% in February. The MSCI EM index mildly gained 0.8% for the month.
Oil prices marked a monthly decline of 0.3% closing at USD 79.5/bbl. due to concerns over U.S. demand as the U.S. GDP fell by 1.4% y-o-y in Q1 2023 and uncertainty on further interest rate hikes despite the production cuts announced by OPEC+ earlier in the month of April. From May 2023 onwards, Oil producers have decided to cut the output by 2 million barrels a day which is equivalent to 2% of global oil demand. The International Energy Agency (IEA) has projected that the jump in oil consumption in China would increase world oil demand by 2 million barrels per day (bpd) to a record 101.9 million bpd in 2023. The direction of oil price will likely be determined by the result of Fed Open Market Committee (FOMC) as they are expected to meet in the first week of May. Even the Bank of England and the European Central Bank are expected to raise rates in upcoming meetings. Gold prices gained 1.1% in April to 1,989.2 $/oz due to weakness in the U.S Dollar.
Looking ahead, the U.S. FOMC meeting scheduled on the first week of May is likely to set the context for global market performance in the near term. With U.S. inflation showing signs of cooling down and borrowing rates being at their highest point in a decade, there are strong indications that the U.S. Fed could deliver its last 25 bps rate hike of the current cycle before hitting the pause button. More than the magnitude of the hike, Fed’s minutes for the upcoming meeting is likely to be eagerly awaited as it could provide indications whether we could see a pause in rate hikes. Indications of a pause could very well trigger a mild rally in equities. The production cuts from OPEC+ from May has led to several investment banks revising their oil price forecasts for 2023 upwards. Although this could provide momentum for GCC markets, slowdown in global oil demand could yet remain an overhang for oil prices with recession concerns still lingering.