JEDDAH, 3 January 2005 — Floating frenzy capped 2004 at the Kuwait Stock Exchange (KSE). During the year, the KSE witnessed the listing and trading of 18 new companies, 8 of which were floated in December, in what seemed to be an end of year rush. Companies were trying to take advantage of favorable market conditions to unlock the value of shareholder investments.
The monthly figure ranks as the highest number of listings in any month since the inception of the exchange. Further, the total number of listings during the year is also unprecedented, surpassing 2003’s record by 5 companies or 38.5 percent.
Nebrass Holding Co., First Takaful Insurance Co., International Resorts Co., Commercial Real Estate Co., Wethaq Insurance Co., Kuwait Invest Co. (Holding), Raad Stores and Sanam Real Estate Co. all made their way into the market in December, according to a report prepared by the Kuwait-based Global Investment House (GIH).
For the first time in the last eight months, the “Global” General Index lost ground, pulling back marginally by 0.3 percent by month end, following the solid bull run from May to November which produced 17.6 percent in gains. The majority of the market was in a buying mood throughout December, absorbing the Central Bank of Kuwait’s mid-month rate hike without any apparent snag. However, three consecutive days of losses, which seem to have been an ordinary correction, dropped the market 1.7 percent to end on a declining note. However, losses during December are not a major blow in terms of total points lost, as the market remains in double-digit growth territory for the year, up 11.9 percent by 2004 end.
Gains in the “Global” Food Index helped weather the fall in the market. The sector as a whole has been greatly underperforming the market since the start of the year, sidelined during most of the 7-month rally which took place from May to November. Thus, the 8.79 percent gains clocked by the sector did not help it nudge out of negative territory for the year, ending 2004 down 12.6 percent. All of the sector constituents posted share value appreciation during December, headed by Kuwait Food Co. (Americana). Americana climbed 12.3 percent higher during the month while United Poultry Co. scaled higher by 4.7 percent. Investors had previously fled the sector following poor profitability at the start of the first quarter. Profitability plunged further in the first half of 2004, falling by 56.8 percent from its 2003 level. However, a turnaround in the performance of Americana helped the sector close the gap to a 17.2 percent fall in profit growth by the end of nine months of 2004.
The non-Kuwaiti sector also continued its winning streak, adding 5.71 percent gains during December, to remain atop the “Global” sectoral indices for 2004 at 38.9 percent. Leading the surge during December has been Shuaa Capital, Arab Insurance Group, Fujairah Cement Co. and Um Al Quwain Cement Co. Shuaa Capital advanced 22.9 percent during the month, while ARIG’s share advanced 22.8 percent. Cement stocks were also close behind, with Fujairah Cement Co. posting 20.4 percent gains and Um Al Quwain Cement Co. registering 15.0 percent share value ascension.
Although the market registered mild losses, it was still able to break out of the narrow band in trading activity which it has traded during most of the year. Both the volume and value of shares traded advanced considerably during December, up 46.2 percent and 23.9 percent respectively.
United Gulf Bank, Fujairah Cement Co. and International Resorts Co. were new faces to the list. UGB traded 134.9 million shares during the month, with increased activity on the stock arising due to a number of favorable events.
During the month, UGB was assigned as the lead manager by Deutsche Bank to offer 121 million shares worth $1 billion ($8.2/share) of Morrocco Telecom’s capital increase to Bahraini offshore banks. UGB’s share price climbed 6.3 percent as a result. International Resorts Co. was another heavily traded stock, although it only traded for half of the month, seeing 108.1 million shares change hands. Interest on the stock was strong from the get-go, but the share price eventually fell 7.0 percent by month end.
Market breadth was slightly tilted toward decliners, with 58 of the 125 listed stocks registering declines. 51 stocks produced gains during the month while 16 scrips remained unchanged.
The GIH report said that a number of positive factors should help stocks regain their winning ways during January. Strong economic activity, accelerating earnings, undervaluation relative to other Gulf Cooperation Council (GCC) market and the continuation of significant fiscal stimulus should help boost sentiment.
