GCC market performance YTD

Published October 13th, 2009 - 02:41 GMT

<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Global Investment House – Kuwait – GCC market performance YTD - Since mid September of last year, the global financial sector has been collapsing, and governments in advanced economies had to intervene, pumping trillions of dollars in order to save the financial system. However, the damage was too big that it had spread around the world, including the GCC. During these last quarters, the GCC went through one of its difficult economic times in its history. Energy prices were dropping into low levels in years, financial markets were racing each other downward; projects were being been delayed; and  sovereign funds were shrinking in size.


The crisis was most reflected in the stock markets that were colored by red most of the time.  Liquidity was the main concern, as confidence has disappeared during the prevalent financial shake-up. Credit availability vanished in the midst of panic in the marketplace, and firms with reputable brands were not immune from this crisis. Banks and lending institutions chose to hold onto cash, and reduced lending substantially, in order to weather the financial crisis.


2009 started with left over of the previous year mess that is still felt in this time. We explore the performance of the GCC stock market in the first three quarters in 2009. Intra-quarter performance of this year is examined using the following indices:


·        Tadawul All Share Index (TASI).

·        Global Kuwaiti General Index.

·        Abu Dhabi General Index (ADX).

·        Dubai Financial Market Index (DFM).

·        Global Qatari General Index.

·        Global Bahraini General Index.

·        Muscat Securities Market 30 index (MSM 30)

The first quarter was the worst among all months. Stock market was plunging across the region, and almost all GCC major indices have witnessed massive decline which was a continuance of the freefall that started in the fourth quarter of 2008. The highest drop was recorded by Qatari market with 25% decline, followed by Omani market with 14.9% decline in MSM30 during 1st quarter. The least fall was registered by the Saudi market with only 2.1% decline in TASI. However, Abu Dhabi market was the only one which ended the first quarter on a positive notch with 4.1% increase in ADX.


In the second quarter, a mirror image of the 1st quarter was taking place, but positively. Stock markets rallied to regain some of the losses. The rally actually started late in March to April, and the following months in the quarter (May & June) performance were strong. Qatari market was the best performing country with 27.5% increase, followed by the Kuwaiti market with 22.6%. The least growth was registered by Bahraini market which increased only by 1.0%. The strong performance was mainly due to the revival of international financial markets. However, other economic indicators sent mixed signals about possible recovery in the world.


The positive performance was carried over to the third quarter, but at a lesser pace. Stock markets in the region were colored in green, except for the Bahraini one. The strongest performance was witnessed in Dubai market with 22.8% increase, followed by the Qatari market with 19.6% increase. The Bahraini market recorded a loss of 2.2%.


Overall, the first quarter was the worst performing period in 2009. The 2nd and 3rd quarters witnessed a reversal of these losses (and much more in most markets), ending the first nine months of 2009 on a positive notch except for Bahrain. The improvement in the latest two quarters of 2009 was mainly due to the improvement in the international markets coupled with the increase in oil prices. For instance, the average monthly price of OPEC basket reached US$41.54 per barrel in January, and the price improved to average US$71.35 per barrel in July.


GCC major Indices Performance






Global General Index - Kuwait





Global General Index - Qatar





Global General Index - Bahrain





Tadawul All Share Index (TASI)





MSM 30 Index





DFM General Index





ADX General Index





Source: Global Research, Regional Stock Markets, & Bloomberg


During the first nine months of 2009, Dubai market was the best performing market with 33.9% increase. This could be due to the better-than expected performance of the real estate sector. Still, the emirate suffered from slumping real estate market, but no worse than what was expected. On the other hand, Abu Dhabi witnessed 30.7% increase in the same period. Unlike Dubai market, ADX was less volatile, and ADX general index was the only one that never decline in any of the three quarters of 2009. Besides, investors were not concerned about Abu Dhabi government solvency. In fact, rumors were spread that Abu Dhabi could rescue Dubai from their creditors.


The Saudi market was the second best performing market with 31.6% increase in the first nine months, and it is the best performing market, since the crisis started. During 4Q2008 to 3Q2009, the Saudi market lost only 15.2%, lowest decline among GCC markets. This was due to the diversification of the kingdom’s economy which also includes manufacturing sector. Still, Saudi economy relies heavily on oil, but at a lesser degree than most of other GCC countries. One might wonder about the Saad & Al-Gosaibi groups’ effect. Nevertheless, the Saudi market is big enough to absorb these shocks. Early news show that there might be settlement with Saad group with the Saudi banks, but settlement of this magnitude will need time in order to materialize.


Kuwaiti bourse, the second largest market, registered a growth of 6.3% in the first nine months which was lower than most of its neighbors in the region. Still, the main issue in Kuwait is the troubles faced by local investment companies. However, recent news indicated positive signs regarding these companies. The banking rescue bill, which was approved in April, improved the market sentiment and assured confidence.


The Qatari market was fifth best performing market in the first nine months. This could be due to strong economic fundamentals and the support from the government to the banking sector. On the other hand, Bahrain is less dependent on hyper-carbon sector, but more dependent on the financials sectors, resulting in the worst performance market among all GCC in the first 9 months of 2009. The Bahraini stock market is heavily weighted towards the financial sector which is the most hurt sector in this crisis. Finally, Omani market, in relative to others, experienced a moderate increase of 20.8% (fourth among GCC) during the same period. However, the MSM30 index represents only the 30 blue-chip companies, not the whole market.


Going forward into the fourth quarter, the financial markets in the GCC region should be able to continue its positive performance, but at a lesser degree. The stability of the international financial markets and the recovery of world economy will result directly in improving energy demand, and this will be reflected on GCC stock markets.  Nonetheless, any occurrence of a major event concerning the financial markets, such the Saudi groups’ debt troubles, could hurt the improvement on the stock markets.   


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