Kuwait market registered a monthly decline of 10.25% in September-2008

<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Global Investment House – Kuwait - Kuwait Stock Exchange Market Performance For the Month of September 2008 - Taking cues from international and regional markets, Kuwait market reported a decline of 10.25% in September-2008 as “Global” General Index ended the month at 331.59 points.  This followed a decline of 4.57% in August-2008.  All the sector indices declined during the September-2008 led by Investment Index which lost 13.4% during the month. The market capitalization reached KD53.11bn at the end of the month, registering a decline of 9.7% as compared to the previous month.

The overall trading activity increased during September-2008 compared to the previous month. Volume of shares traded on the bourse witnessed a monthly gain of 32.9%, aggregating to 5.06bn shares in the month. Similarly, value of shares traded on the bourse witnessed a monthly gain of 22.5%, aggregating to KD2.52bn in the month. Zain was the top value leader for the month with 192.2mn shares changing hands at a value KD321.6mn. Al Safwa Group Company was the top volume leader for the month with 671.6mn shares changing hands at a value KD103.4mn.

The major gainers during the month were Contracting & Marine Services Company (32.1%), NAPESCO (29.2%) and First Dubai For Real Estate Development Co. (25.0%),  whereas major losers during the month were Al Safat Energy Holding Company (Hasibat Holding Company) (-57.3%), Burgan Group Holding Company (-53.2%) and Mashaer Hajj & Umrah Services Consortium (-45.9%).

During the month of September-2008, Global Banking Index was down by 6.7%. Among Banking sector components, Kuwait Finance House (KFH) lost 21.5% during September-2008 to reach KD2.120.  Kuwait Finance House has informed that it is investing US$275mn in a real estate project in China as part of plans to boost its exposure to Asia. KFH has signed a deal with China’s Nan Hai Corp to invest in the US$3bn Peninsula real estate development through its Asian Fund 2.

Among other Banking sector components, Bank of Kuwait & the Middle East lost 2.9% during September-2008 to reach KD0.660.  Fitch Rating has affirmed the Bank of Kuwait & the Middle East ratings at Long-term Issuer Default (IDR) ‘A-’ with Stables Outlook, Short-term IDR ‘F2’, Individual ‘C’ and Support ‘1’. The Support Rating Floor is affirmed at ‘A-’. BKME’s IDRs and Support rating reflect the extremely high probability of support from the Kuwaiti authorities, in case of need.

During the month of September-2008, Global Services Index was down by 13.2%. Among Services sector components, Zain lost 15.1% during September-2008 to reach KD1.460.  Zain has informed that it is in talks to buy a mobile telephone license in Rwanda and may bid for a stake in a telecoms firm in Mali. Zain is planning to make an offer for a stake in Mali’s state-owned telecoms company Societe des Telecommunications du Mali (SOTELMA), which is expected to be privatized before the end of the year.

Among other Services sector components, Agility lost 20.2% during September-2008 to reach KD0.830.  Agility announced the signing of KD3.2mn contract with the Kuwait National Petroleum Company (KNPC) to provide 4PL logistics solutions in Kuwait. Under the five year contract, Agility will manage warehousing activities such as materials handling and spare parts, preservation and re-organization for KNPC in Kuwait.

On the macroeconomic front, Kuwaiti money-supply growth slowed marginally to 15.3% in August 2008. M2, a measure of money circulating in the economy, hit KD20.62bn (US$77.14bn) in August, compared with KD17.88bn a year earlier, the Central Bank said in a monthly report. Money supply growth is an indicator of future inflation. In July, M2 money supply was up 15.4% from a year earlier. Inflation in Kuwait was 11.35% in June, as per the latest published data, just off a record level reached in April 2008. Narrow money, or M1, rose 0.7% to KD4.65bn in August from KD4.62bn in July. The growth rate was 12.7% in July and 16.0% in June, the data showed.

Kuwait stock market declined during the past month mainly on account of negative sentiments and also taking cues from global markets. The global markets, which started to decline in the wake of sub-prime meltdown, are still witnessing declines amongst the slowdown in US and Euro Zone. The decline in the market has also been triggered by the outflow of foreign investments. Foreign investors have been exiting emerging markets (GCC markets being no exception) on account of liquidity crunch and losses in the global equity markets. The selling pressure by foreign investors has accentuated over the past few days in the wake of recent crisis of leading financial institutions such as Lehman Brothers, Merrill Lynch, AIG, Wachovia etc. The developments in neighboring markets have also adversely impacted risk appetite of investors in Kuwait stock market as the GCC stock markets are positively correlated to each other.

We believe the macroeconomic factors remain strong which will help the corporate sector going forward. However given the volatility in the market and prevailing negative sentiments, it is difficult to predict the direction of the market with certainty. The increased correlation between developed markets and emerging markets has also become an important factor in determining the direction of the market. To sum it up, while the fundamental factors are still going strong, the negative sentiments are continuing to impact the market adversely. We believe relaxation of lending curbs placed by Central Bank of Kuwait and buying support by sovereign wealth funds like Kuwait Investment Authority (KIA) will provide much required support to local bourse.