Markaz: GCC markets break their losing streak as Aramco’s mega IPO draws closer


Kuwait Financial Centre “Markaz” recently released its Monthly Markets Review report. Markaz report stated that the GCC markets broke their three-month losing streak, aided by gains in Saudi and Kuwait equities. Optimism surrounding Saudi Aramco IPO, Morgan Stanley’s “overweight” recommendation on Kuwait equities ahead of its upgrade to emerging markets and a potential trade truce between U.S. and China helped GCC equities to end the month of November on a positive note.  

Kuwait All Share index extended its gains, posting an increase of 3.7% in November.  Among Kuwait’s Blue Chip companies, National Bank of Kuwait and Kuwait Finance House were the top gainers with monthly gains of 7.4% and 6.6% respectively. During the month, MSCI announced that it would increase the weight of National Bank of Kuwait in its indices. This helped NBK’s shares register sizeable gains over the course of the month. Kuwait’s Banking Sector was the best performer in November, with the Banking index rising by 5.1% while the Financial Services sector was the top loser, falling by 0.7%.

Regionally, the S&P GCC composite index gained by 1.3% for the month with four of the seven markets posting gains. Kuwait was the best performer in November, followed by Oman and Saudi Arabia, whose indices increased by 1.6% and 1.5% respectively. Abu Dhabi, Dubai and Qatar ended November in negative territory, with their indices decreasing by 1.5%, 2.5%, 0.4% respectively. The long awaited Saudi Aramco IPO picked up pace with Saudi Arabia announcing the start of IPO process and appointing banks for its book building process earlier in the month. Final price would be announced on 5th December 2019. Due to the sheer size of the listing and its importance in moving Saudi Arabia towards a non-oil economy, there has been a general optimism around Saudi markets. However, the gains in emerging GCC markets were truncated towards the close of the month due to MSCI’s rebalancing of its EM indices. This led to passive funds outflow in turn causing a slide in GCC markets, particularly Saudi Arabia.

Markaz report also stated that among the GCC Blue Chip companies excluding Kuwait, National Commercial Bank was the top gainer for the month with its stock price rising by 5.7%. Mesaieed Petrochemical Holding Co. ranked second among gainers posting a 4.0% increase.

The performance of Global equity markets were largely positive with the MSCI World Index gaining 2.6% for the month. U.S. equities (S&P 500) extended its gains with a rise of 3.4% in November. Announcements from U.S. and China that they are close to reaching agreement on the first phase of trade deal and that expectations that it would remove threats of further trade war invoked positivity in equity markets. The UK market (FTSE 100 index) closed 1.4% higher during November, as investors expect the U.K. elections to provide a definitive resolution to Brexit. Emerging markets ended the month in negative, with the MSCI EM posting monthly loss of 0.2%.

Oil markets closed at USD 62.4 per barrel at the end of November, which is 3.6% higher than October. Signs of progress in U.S.-China trade deal and the expectation that the OPEC would continue to maintain production cuts contributed to the increase in oil price while limiting volatility. Oil’s gain comes despite OPEC’s projection of lower oil demand in 2020 and the observation that rivals were pumping more despite a smaller surplus of crude in the global market