Markaz: Oil Crosses $120/b and Propels GCC Markets Even Higher

 Kuwait Financial Centre “Markaz” recently released its Monthly Market Review report for the month of March 2022. In line with its GCC peers, Kuwait’s all share index gained 6.7% in the month of March, supported by a rise in oil prices. Oil prices, which were a major driving factor for the GCC stock market performance, crossed USD 120 per barrel mark in the month of March.

Among sectors, Boursa Kuwait’s Banking sector was the top gainer, rising 9.9% followed by financial services sector at 5.3%. Healthcare sector had the biggest decline in the month and Energy sector index declined, falling 5.3%. Among Premier Market stocks, National Investments Company and Boursa Kuwait were the top gainers during the month, rising 23.7% and 14.3% respectively.

Inflation in Kuwait rose to 4.37% YoY driven by rising prices of food and housing services, in the month of February 2022. Kuwait's government is taking cautious measures to keep critical commodity prices in check and has halted all grain exports for the next three months. Central Bank of Kuwait has raised its main interest rates by 25 bps in March, subsequent to the interest rate hike by the U.S. Federal Reserve and Kuwaiti banks are expected to be benefitted by this interest rate hike. Saudi Arabia, UAE and Bahrain have also increased their policy rates by 25 bps. Kuwait’s M2 money supply expanded 1.9% YoY in January, and bank lending to the private sector grew by 6.8% YoY in the same month. Kuwaiti bank revenues grew 7.1% in 2021 with profits almost doubling to $2.9 billion driven by increase in revenues as well as decline in loan loss provisions. According to Moody’s, Kuwaiti Islamic Banks have recorded the fourth best growth rate in financing operations, globally, during the period 2019-Q3 2021. 

Ali Alghanim & Sons whose businesses include car dealerships, construction and electronics has filed to list on Boursa Kuwait and the company is expected to sell a 45% stake in the listing, as per Bloomberg.

Regionally, S&P GCC composite index rose by 4.8% for the month, driven by upward oil price momentum. All GCC markets gained for the month. Abu Dhabi and Bahrain equity indices were the biggest gainers among GCC, rising 6.8% and 5.6% respectively over the month. Qatar, Saudi Arabia and Oman equity indices also marked a gain of 4.5%, 4.0% and 3.7% respectively over the month. Among the GCC blue chip companies, the best performer was First Abu Dhabi Bank, which gained 14.6% during the month. Due to a sharp increase in oil prices and robust domestic demand, Saudi Arabia's real GDP increased by 6.7 percent year on year in Q4 2021. S&P upgraded Saudi Arabia's outlook from stable to positive, as it expects improved GDP growth and fiscal dynamics in the medium term, improved oil sector prospects and the Government’s reform programs. The IPO of Dubai Electricity and Water Authority (DEWA) opened for subscription on March 24, intends to float 17% and could raise as much as USD 5.7billion.

Developed markets ended positive for the month with MSCI world gaining 2.5%, S&P 500 gaining 3.6%, Japan’s topix gaining 3.2% and UK’s FTSE gaining 0.8%. US inflation increased 7.9% y/y in Feb 2022, recording a fresh 40-year high mainly driven by rising food and fuel costs. U.S. Treasury yields jumped during the month, with the benchmark 10-year note surging from 1.82% (February end) to 2.35%. In February 2022, the unemployment rate in the US fell to a two-year low of 3.8% as job growth soared. The Bank of England has hiked interest rates three times in a row, returning Bank Rate to its pre-pandemic level of 0.75%.

Oil prices were up 6.9% for March 2022 due to supply tightness and United States is considering the release of up to 180 million barrels from its strategic petroleum reserve over several months to calm soaring crude prices. The United States has stated that it will work to supply 15 billion cubic meters of liquefied natural gas (LNG) to the European Union this year to help reduce their reliance on Russian energy supplies.