Global Investment House – Kuwait Stock Exchange Performance–

Improved corporate earnings results and prevailing high oil prices could not elevate the investor sentiments during the month of February, as the Kuwait market measured by the “Global” General Index dropped by 3.19% and ended the month at 320.62 points. The bearish sentiments in the market can be attributed to the fact that investors are liquidating their holdings to prepare for the upcoming IPOs such as Ithmaar Bank and AlBaraka Banking Group, which are likely to hit the market in the next couple of months. The market capitalization of the stock exchange reached KD42.27bn, down 2.56% as compared to the previous month. Kuwait Stock Exchange (KSE) price index breached the 12,000 point mark on 7th February, 2006. However, KSE could not sustain the growth and closed at 11,542.9 points, declining 2.64% compared to the previous month.

The volume and value of shares traded on the bourse were subdued due to reduced number of trading days in the month. The volume of shares traded amounted to 2.89bn shares, a decline of 3.79% as compared to the previous month. On the other hand, the value of shares traded increased by 9.61% aggregating to KD1.56bn over the last month. We think that the market will continue to break out of the range bound trading which has been occurring in the past two months, driven by the repositioning of investor funds in preparation for the first quarter earnings season, which is just around the corner.

The “Global” Insurance Sector index advanced by 1.39% during the month of February. Four insurance companies reported FY-2005 aggregate earnings growth of 89.0%, up from KD23.42mn to KD44.26mn. The industry leader in terms of earnings growth, Warba Insurance Company reported a net profit of KD12.55mn for FY2005 as compared to KD5.38mn reported in the previous year. As a result of improved earnings, the stock price appreciated by 6.0% to the end the month at 710fils.

The banking sector represented through the “Global” Banking Index declined by 3.67% in February. Although the banks have reported healthy annual earnings growth, seven out of the eight listed bank’s stock price declined during the month. Burgan Bank (Burgan) was the only scrip that appreciated by 3.3% to end the month at 620fils. This can be likely attributed to the earnings growth of 43.3%, coupled with the BBB+/A-2 long-and short-term credit ratings by Standard & Poor's Ratings Services (S&P).

Global Investment House (Global) hogged the limelight during the month of February after announcing bumper annual results. Global’s earnings improved by 188.3% from KD21.32mn in 2004 to KD61.46mn in 2005. During the month, Global announced the launch of an IPO for Ithmaar Bank of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Bahrain and signed an agreement to manage the capital increase of Kuwait Energy Company KSCC (KEC).  Moreover, Global has also launched a new Energy, Petrochemical and Downstream Industries Fund (EPADI) that aims to capture investment opportunities in energy, petrochemical and downstream industries companies present in the region. As a result, the stock price of Global appreciated by 12.3% to end the month at  KD3.100.

The “Global” Real Estate Sector Index led the market among the losers, dropping by 6.4%. Under the real estate sector index, 19 companies out of the 28 companies registered a monthly decline in their stock prices. The major activity under the real estate sector happened in Grand Real Estate Projects Company (Grand), which signed an initial deal to acquire 51% of Kuwait Lebanese Real Estate Development Company (KLREDC). The two firms have signed a memorandum of understanding in which investors in KLREDC will swap 10 shares in their firm for 7 shares in Grand Real Estate. To further complement this deal, Grand also announced healthy earnings growth of 441.2% (y-o-y) from KD2.55mn in 2004 to KD13.80mn. As a result of these positive announcements, the stock price of Grand appreciated by 11% to end the month at 910fils.

The market breadth was clearly favoring the decliners with 104 stocks declining and 38 stocks advancing, while 18 stocks remained unchanged. Among the major advancers during the month were Egypt Kuwait Holding Company (+37.8%), Credit Rating and Collection company (+25.5%) and Kadhma Holding Company (+24.5%). The major decliners were Al-Mal Investment Company (-25.9%), Gulf Finance House (-25.4%) and Al-Ahlia Investment Company (-21.8%). (It is worth noting that corrections this month could be because of the bonus/right issues). With the macro picture being positive on the back of prevailing oil prices and a cheaper valuation evident in KSE compared to the other regional markets, it may possibly mean that KSE is likely to rebound strongly in the month of March. We believe that investors, both institutional as well as retail, will churn their portfolio to take new positions after analyzing the broad picture of corporate earnings.

Value Leaders  (in KD)

Volume Leaders