JEDDAH, 13 February 2005 — Neither a growing rift between the National Assembly and the government, nor three separate terrorist-linked incidences on Kuwaiti soil could douse positive market sentiment during January. Instead, investors took their cue from end of year earnings reports that started rolling in early in the month. Key economic releases also kept market sentiment upbeat. The KSE, as measured by the “Global” General Index advanced 2.5 percent, even though market breadth was in favor of decliners 46 to 69 for the month.

Investors got their first taste of bottom line performance when a handful of banks and investment banks began posting their results. By month end, a total of 15 companies in the market reported earnings, with the aggregate market earnings advancing at fast clip of 28.3 percent, according to a report prepared by the Kuwait-based Global Investment House (GIH).

Rising interest rates have also helped banks improve their profitability in 2004. Thus, during January, 7 banks revealed profits, with aggregate profit growth reaching 27.5 percent. The sector as a whole, represented through the “Global” Banking Index produced 4.9 percent in gains, solely on gains on four bank counters. Gulf Bank led the pack, seeing net earnings rise by a massive 54 percent. The stock saw exceptional activity, climbing 24.1 percent higher by month end.

KFH was another winner, advancing by 13.4 percent following its announcement of 27.9 percent growth in profits. Commercial Bank also revealed profit growth of 10.1 percent, driving its share value higher by 2.8 percent. KREB was another winner, up 1.8 percent. However, BKME, NBK, ABK and Burgan Bank all ended lower by 13.6 percent, 1.5 percent, 2.3 percent and 1.4 percent respectively, unable to capitalize on growing earnings. But it was the non-Kuwaiti sector that continued to lead the market through January, picking up where it left off in 2004. The sector as a whole advanced by 10.8 percent by month end, following 5.71 percent in gains in December.

Cement companies, the GIH report said, recaptured the spotlight during the month, all advancing in double digit territory. Gulf Cement Co. continued to lead the sector, advancing by 21.2 percent, followed by gains in Ras Al-Khaimah White Cement (+20.0 percent), Sharjah Cement Co. (+17.1 percent), Fujairah Cement Co. (+16.9 percent) and Um Al Quwain Cement Co. (+15.9 percent). However, despite strong profit expectations, ARIG, Shuaa Capital and UGB were on the decline by the end of January.

Despite another good year for the Kuwaiti real estate sector, in which the total value of sales advanced by around 10 percent for the whole year over the record performance in 2003, and prices continued to climb, real estate stocks have been out of favor in the past two months. Following losses of 5.32 percent in December, the “Global” Real Estate Index shed another 5.6 percent during January. The major factor constraining gains in the sector has been concerns surrounding end of year earnings. Nine months’ profits had again fallen short of expectations, following disappointing first half profitability. The sector as a whole had seen profits decline -2.0 percent, against the trend of rising profits in the overall market.

Nevertheless, during January, Commercial Real Estate Co. slid lower by 17.4 percent.

The majority of sector’s other components were also big losers. Enmaa Real Estate Co. fell by 10.8 percent while Salhiya Real Estate Co. lost 8.6 percent and Al Mal Real Estate Co.’s share value retreated by 6.9 percent. On the up side, International Investment Projects Co. moved against the tide, rising by 175.9 percent subsequent to re-listing in the market following a suspension period which lasted since March 2000. Sanam Real Estate Co. also saw marginal gains of 4.6 percent, following heavy losses in the company in its first month of trading in December. Currently, the stock is trading at a premium to the sector, at a P/E of 24.5 times on account of expectations in strong end of year earnings.

Other stocks besting earnings expectations were results turned in by Global Investment House, Gulf Investment House, Bayan Investment Co., Kuwait and Middle East Financial Investments Co., Gulf Finance House, National Mobile Telecommunications Co. and Al Ahlia Industrial Projects Co. All five of the investment companies saw share prices move higher. However, despite strong profit growth of 73 percent and news that the Ministry of Electricity would purchase KD9.8 million in products from AAIP over the next three years, this did little to conjure a rally on the stock in the final days of the month, therefore ending lower by 9.2 percent. Similarly, shares of NMTC slid 9.9 percent by month end.

Positive market sentiments were nevertheless accompanied by diminishing trading activity. The market as a whole saw a 31.3 percent fall in the volume of shares traded. At the same time, the value of shares traded was nearly halved, falling by 42.5 percent.

In fact, on Jan. 17, the market posted its lowest daily trading level in the past year, with aggregate market value changing hands reaching only KD29 million. Daily activity during the entire month was weak, falling below the KD1 billion mark to KD791 million for the first time since November 2003, the GIH report said.