Markaz: GCC Equities start 2021 with strong performance driven by rising investors’ hopes of economic recovery

02/02/2021

Kuwait Financial Centre “Markaz” stated in its Monthly Markets Review report for the month of January 2021 that GCC equity market started the year on an optimistic note. Oil prices increased by 7.9% for the month. Investors cheered the rapid rollout of vaccines in UAE that would enable it to attain herd immunity swiftly. Furthermore, additional stimulus measures unveiled by Dubai Emirate to reverse the economic impact of COVID-19 pandemic rose investor hopes of quick recovery in economic activity.

The Kuwait equity market was the second best performing in the region. It unveiled its draft budget for the fiscal year starting April 01, 2021. It intends to boost spending by 6.9% in the coming fiscal year and forecasts narrower deficit of KD 12.1 billion, 13.8% lower than the deficit budgeted for the current fiscal year. Kuwait All Share index gained 4.2%, while its index PE ratio stood at 21.2, a premium of 43% compared to S&P GCC index. Market liquidity in January as indicated by the average daily traded value stood at USD 137million.

Among Kuwait sectors, insurance was the top gainer, rising 20.2%, while oil & gas index declined, down 3.0% for the month. Among blue chips, Agility Public Warehousing gained the most at 11.4%. The firm recently refinanced and increased its credit lines with banks to finance its growth plans.

Regionally, the (S&P GCC composite) index gained 2.9% led by strong performances in UAE markets. As of January 28, UAE has vaccinated 29% of its population much higher than nations such as U.S. (7.9%), China (1.6%) and India (0.2%). If the vaccination pace is sustained, UAE could attain herd immunity by Q2, 2021. Abu Dhabi equity market gained 10.9% for the month while Dubai market increased by 6.5%. Saudi Arabia and Qatar rose by 0.2% and 0.4%, respectively. All GCC Sectors, except for energy, were in the green with healthcare index gaining the most at 3.9% for January followed by banking index with a gain of 3.1%. Energy sector index underperformed the broader index and closed 1.5% lower for the month.

Markaz report also stated that among the GCC blue chip companies, Emirates Telecom (Etisalat) increased by 16.9% in January. The company raised foreign ownership limit to 49% of capital from existing level of 20%. First Abu Dhabi Bank and Emirates NBD rose by 14.6% and 12.6%, respectively for the month. Both the banks decided to hand out cash dividends as they did in 2019, despite the COVID-19 impact on profits. The act reinforced investors’ faith in the strength of banks financial position to weather the current economic environment. Other significant gainer among GCC blue chips include Industries Qatar, which rose 10.4% for the month.

The performance of global equity markets was negative, with the (MSCI World) Index closing 1.1% lower in January. U.S. market (S&P 500) retreated 1.1% for the month from earlier highs after disappointing earnings from tech companies. In Europe, increasing COVID-19 infection rates reintroduce the risk of continued recession. European markets dragged lower with U.K (FTSE 100) decreasing by 0.8%. France and Italy lost 2.7% and 3.0%, respectively for the month.

Oil prices closed at USD 55.9 per barrel at the end of January 2021, posting a monthly gain of 7.9%. Oil markets were enthused by good progress on the vaccination front and increased stimulus measures in the U.S by Biden administration. However, the International Energy Agency’s (IEA) recent report that revised down the demand outlook for 2021 capped further price gains.

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