JEDDAH, 3 August 2006 — The Kuwait stock market was not able to sustain the marginal gains witnessed in June, with the benchmark Global General Index registering a monthly loss of 4.40 percent to end the month of July at 266.43 points. Even the various corporate earnings announcements during the month were not able to elevate the stock market due to the current tensions in the Middle East region. The market cap weighted index still reported an overall YTD loss of 16.80 percent at the end of July, according to a report by the Kuwait-based Global Investment House (Global).

The market capitalization of the stock exchange reached KD37.54 billion, a monthly decline of 4.32 percent compared to the previous month. Kuwait Stock Exchange Price Index once again dropped below the psychological 10,000-point mark in July, as it ended the month at 9,427 points — a monthly drop of 5.75 percent.

The corporate earnings increased 9.66 percent in the first half of this year (63 companies whose results were available till July 31) as compared to the corresponding period of the previous year.

Banking and services sectors continued to be among the sectors that produced positive earnings growth for the first half, whereas all the remaining sectors have shown disappointing performances.

This drop in the earnings by various sectors could be directly linked to the drop in capital markets; especially the investment, insurance and real estate sectors that have witnessed steep decline in their earnings during the first half. Banking sector has continued to be the star performer so far for the year 2006 in terms of both earnings growth as well as growth in the sector index. The global report said the subdued trading activity during the month could be attributed to the current tensions as well as the holiday season.

The volume of shares traded saw a drop of 43.39 percent as compared to the previous month aggregating to 2.02 billion shares. The value of shares traded also witnessed a substantial monthly drop of 46.50 percent amounting to KD0.85 billion. The value of shares traded dropped the one billion Kuwaiti dinar mark for the first time in the last 18 months.

During the month, International Investment Group, Gulf Petroleum Investment and Grand Real Estate Company (GRAND) hogged the limelight as they were among the top trading scrips. According to reports, Grand Real Estate Projects Company plans to launch Gulf Cooperation Council’s (GCC’s) first tourism bank. The bank will have a capital of $1 billion and will be established by the end of this year.

Banking sector index dropped 4 percent in July despite a healthy improvement in corporate earnings for the first half of 2006.

On the corporate front, Capital Intelligence has upgraded the ratings of Burgan Bank and Gulf Bank during in July. Gulf Bank was awarded ‘A1’ short-term rating by Capital Intelligence, which indicates the bank’s “superior credit quality.” Moreover, the higher rating also reaffirms bank’s financial stability and overall credit worthiness to meet the financial obligations. Burgan Bank’s foreign currency long-term and financial strength rating has been raised to A- from BBB by Capital Intelligence.

The market breadth was clearly in favor of decliners as 133 stocks dropped as compared to only 21 gainers. The major gainers during the month were Egypt Kuwait holding Company (+38.5 percent), Kuwait Insurance Company (+19.0 percent), and Ajial Real Estate & Entertainment Company (+15.2 percent). The biggest losers during the month were National Petroleum Service Company (-29.5 percent), Gulfinvest International (-28.5 percent), International Resorts Company (-27.8 percent) and International Financial Advisors (-27.1 percent).

“It is difficult to take a near-term view on the market with the kind of volatility we are witnessing in the capital markets. However, we believe that the investors are still in the mood of a ‘wait and watch’ strategy, till the situation in the Middle East eases. Also with the bearish sentiments prevailing in the market, and stock still being beaten down, the market now presents attractive investment options,” the Global report added.