Kuwait Financial Centre “Markaz” recently released its Monthly Markets Review report.
Markaz report stated that GCC stock market winning streak continues with April 2018 marking another positive month. S&P GCC Index was up by nearly 3% for the month and is now up by nearly 10% for the year, making it as one of the best performing regions in the world. Contrastingly, Boursa Kuwait main index ended the month lower by 1.8%. Both the MSCI world index and MSCI Emerging market index are flat for the year. GCC performance is largely attributed to the strong Saudi rally that saw its Tadawul index climb 14% for the year.
The report added that the expectation of Saudi being included in the MSCI and FTSE index along with the much awaited Aramco IPO is fuelling this rally. Qatar reversed its long streak of poor performance by rallying strongly in April 2018. The Qatar index was up by 6% for the month and 7% for the year.
This is also clearly an oil price led rally. Oil price is now hovering around $75/barrel on the back of strong OPEC compliance and very strong demand from all over the world, which supports the GCC countries. The strong increase in oil price is not letting the guard off in terms of bond issuances. Sovereign issuances continue as we witnessed two mega offerings from Saudi Arabia and Qatar to the tune of approximately $12 billion each. Saudi Arabia has now started listing local bonds in the Tadawul exchange in order to provide liquidity to bond trading which is a great step, given the volume of issuances every year.
MENA Market trends
Markaz report said that the corporate earnings for 2017 increased by 16% in 2017 on the back of strong banking sector that witnessed a growth of 9%. Major GCC banks including Al Rajhi, NBK, Emirates NBD and QNB delivered good results. We expect corporate earnings to rise by 4% in 2018.
IMF growth forecasts are heartening to note. While global growth is pegged at 3.9%, Mena region is expected to clock 3.7%.
With the stakes getting higher in the oil market, analysts believe that the demand will soon outstrip supply with a forecast requirement of 100 million barrels a day this year. This has shoot up the oil prices by 13% YTD with Brent Oil selling at little more than $70 per barrel. While this will highly benefit the OPEC countries that are restricting demand according to the OPEC deal (Saudi Arabia wants the prices to climb the range of $80-$100), U.S president Donald Trump cried foul over the “artificial high prices”.
Current international issues like the U.S pulling out of the Iran Nuclear deal and imposing sanctions, oil output falling from Venezuela (OPEC’s largest producer in Latin America) and US sanctions on Russia (another big producer) are helping the price increase by decreased supply and fear of political imbalance. But the US and Iran are not likely to be that much affected as a surging U.S. shale oil production could potentially outweigh OPEC's effort to end a supply glut and Iran could look to other markets for its oil.
About Kuwait Financial Centre “Markaz”
Established in 1974, Kuwait Financial Centre K.P.S.C “Markaz” is one of the leading asset management and investment banking institutions in the Region with total assets under management of over KD 1.03 billion as of 31 December 2017 (USD 3.40 billion). Markaz was listed on the Boursa Kuwait in 1997.