The performance of the Kuwait Stock Exchange so far in 2003 has proved highly robust. According to a report by Kuwait-based Global Investment House, the KSE has seen 13 companies listed up to the end of November, representing 85.7 percent more listing than 2002.
Backed by positive investor sentiment, strong corporate earnings, and high liquidity, the Kuwait Stock Exchange seems celebrating the continuous breaching of its all-time highs since the start of the year. The performance of the KSE has captured the eyes of regional and international investors. Local investors were given a further boost of confidence when Prince Alwaleed ibn Talal purchased a 5 percent stake in the International Financial Advisors Co. (IFA) worth around 116 million Kuwaiti dinars or $395 million, affirming the strong potential still existing in the market.
GCC markets have also shown the same sentiment as Kuwait. All the GCC markets showed positive performances for the nine-month period of 2003 with Saudi Arabia (+69.8 percent) leading the pack. Qatar (+52.4 percent), Oman (+34.2 percent), UAE (+28.1 percent) and Bahrain (+18.8 percent) also showed smart gains. With world markets still struggling to regain momentum, Dow Jones Industrial (11 percent), NASDAQ composite (34 percent), S&P500 (13 percent) and FTSE-100 (4 percent), the performance of KSE as well as other GCC markets stands out all the more. With liquidity at record levels and the fundamentals of the Kuwaiti economy remaining strong with increased investor interest in the stock exchange, it all presents a bullish outlook for the remainder of the year. We do believe though that a periodical consolidation phase may be inevitable and profit-taking will occur as a natural short-term corrective step.
After having achieved a gain of 24.11 percent (as measured by the Global General Index) in 2002, the KSE went on to record a further growth of 27.98 percent in the first half of 2003. It didn’t stop there though, as the KSE made a 18.27 percent gain on a heavy 184 million average shares volume in the third quarter, closing at 157.71 points. The closing was slightly down from its all-time high of 162.11 points achieved during the year. This lead to a YTD growth of 51.36 percent. The Real Estate and the Services sectors have ranked as the top performers thus far in 2003 recording a 94.11 percent and 81.73 percent gain in their respective index performances. These two sectors have been the dominant gainers since the start of 2002 when they recorded 42.79 percent and 38.37 percent growth respectively for the year. The other sectors which have outperformed the Global General Index in the nine-month period of 2003 included the investment (60.37 percent) and the non-Kuwaiti sector (64.71 percent).
The Banking sector has continued to under perform the Global General Index, as did the Insurance, Industrial and Food sectors. The third quarter of 2003 saw a turn-around in the performance of large caps as they gained ground on small caps, although small caps remained atop, posting a 38.16 percent YTD gain as compared to 35.78 percent recorded by the Global Large Cap index. Just a quarter earlier (June 2003 end), large caps lagged far behind, registering a 18.94 percent YTD gain as compared to 30.91 percent for small caps. Continuing to outperform the Kuwaiti index in 2003 for the first time in the last few years, the non-Kuwaiti index gained 64.7 percent compared to a 50.94 percent YTD gain posted by the Kuwaiti index.
The number of listed companies at the KSE has expanded handsomely so far in 2003. Up to the end of October 2003, already 13 companies have been listed, with the exchange housing a total of 108 companies, with quite a few more in the pipeline for the remaining month of the year. This represents an increase of 85.7 percent over 2002 listings so far, stressing the importance the exchange represents to the investing community and corporate managements. Since the beginning of the year, the investment sector has seen six companies listed, the real estate sector saw two listings while the service and non-Kuwaiti sectors each have seen one listing. The industrial sector witnessed three new listings up to the end of November. The companies listed during the current year were Kuwait Packaging & Material Company, Jeezan Real Estate Co. (transferred from parallel market), A’ayan Leasing and Investment Co., Bayan Investment Co., Kuwait Building Materials Co., Global Investment House, Osoul Leasing & Financing Co., Gulfinvest International, Kuwait Financing Services, National Industries for Building Materials Co., National Petroleum Services Co., KAMCO, Kuwait Lebanese Real Estate Development Co. and Bahrain Kuwait Insurance Company. The latter two were listed in November 2003. Not only has the KSE seen new additions to the exchange, but two suspended companies were also reinstated for trading during the current year. Kuwait Real Estate Co. returned to trading in the last two days of the third quarter while Um Quwain Cement Industries Co. was restored in October after a suspension period of more than four years. International Investor Co. and Bahrain International Bank are expected to return to trading in the near future after getting the approval from the KSE.
The Kuwait Stock Exchange has seen a bout of frantic trading leading to unprecedented growth in activity in 2003. Trading activity, which grew more than five times in the last two years has nearly doubled in the nine months of 2003.
After the value of shares traded in 2001 increased by about 177 percent to reach 3.58 billion dinars, 2002 registered an 87.6 percent increase with a value of 6.68 billion dinars. Value of shares traded has already surpassed the 10 billion dinars barrier to total 11.66 billion dinars for the three quarters of 2003 with mounting expectations for the remainder of the year.
The improved state of the both the investment and real estate markets has had a favorable effect on trading of companies in both sectors, as they led the value of shares traded. The real estate sector topped all increases thus far in 2003, reaching 121.5 percent over its total activity in 2002, closely followed by the investment sector which showed a 117.6 percent. But the most surprising is the Non-Kuwaiti sector which saw 117.7 percent more dinars changing hands to total 247 million dinars thus far in 2003 as compared to 113 million dinars total in 2002. Companies that generated the highest trading activities across all sectors for the third quarter included Kuwait Investment Projects Co/, Industrial and Financial Investments Co., Kuwait Finance Center, Al-Mal Investment Co. and Al-Massaleh Real Estate Co.
The activity at the KSE during the third quarter of 2003 was lower compared to the second quarter of this year. This can be attributed to profit-taking as well as small investors fearing steep price adjustments. The third quarter corporate results though are expected to fuel another bout of activity on the exchange, the concentration this time will most likely be on stocks that hold operational growth potential.
With prices already appreciating contentedly and 90 of the 98 traded companies in 2003 seeing healthy gains up to the end of September 2003, the total market capitalization of the KSE has surged and stood at 16.537 billion dinars as of the end of the third quarter as compared with 10.54 billion dinars at the end of 2002.
The banking sector accounted for nearly 35 percent of the total market capitalization of all the listed stocks at KSE, down more than 7 percent from its December 2002 figure. The improvement in the market during 2002 was also accompanied by improved turnover levels. All sectors registered higher turnover levels, with investment, real estate and food registering 223.5 percent, 214.61 percent and 172.5 percent compared to 165.13 percent, 138.29 percent and 145.91 percent respectively at the end of 2002.
Though gains by the KSE have been mostly attributed to liquidity, positive investor sentiment and post-war political stability in the region, a look at corporate earnings for the first half of 2003 solidifies the expansionary phase of the business cycle which Kuwait is currently going through. The aggregate earnings of listed companies reached 644.8 million dinars for June 2003 compared to a profit of 388.9 million dinars achieved during the corresponding period last year, representing a healthy 57.32 percent growth for the total market.
