DFM index outshines peers in 2012

The year 2012 witnessed several key developments that shaped GCC equity markets’ performance including the implementation of the bylaws and regulations of the Capital Markets Law issued by the Capital Markets Authority in Kuwait, the recovery of the real estate sector in Dubai and the announcement from the Saudi Capital Markets Authority that it would allow listing by foreign companies that already have their shares listed on other regulated exchanges. During FY-12, Dubai Financial Market as measured by DFM General Index led the stock markets in the GCC region ending as the best performing market and posting a whopping 19.89% gain. Abu Dhabi Securities Exchange as measured by ADX General Index trailed with a 9.52% return followed by Saudi TADAWUL All Share Index rising 5.98%. All the GCC markets ended the year on a positive note with the exception of Bahrain Bourse and Qatar Exchange losing 6.83% and 4.79%, respectively.

During December, the combined market capitalization of the 7 GCC bourses added $14.7 billion driven by the gains witnessed by TADAWUL which mounted to $16.6 billion. After gaining $80 billion and $90 billion in their market capitalization during 2009 and 2010 respectively, GCC bourses plunged in 2011 with combined losses in their market cap of $56 billion. However, during 2012 the GCC bourses combined market capitalization advanced 6.1% to end the year at $762.6 billion, up from $719 billion in 2011 driven by TADAWUL, which accounts for 49% of the GCC bourses market cap, surging 10% (equivalent to $34.5 billion) to $373.3 billion in 2012 up from $338.8 billion in 2011. Abu Dhabi Securities Exchange added $8.3 billion to its market cap to end the year at $79 billion benefiting from the improvement in investors’ sentiment and the robust economic growth and better than expected corporate earnings. Qatar Exchange, the second largest stock market in the GCC region, and Kuwait Stock Exchange were relatively stable during the year at $126 billion and $103 billion respectively. Even throughout the recent 2 years of political uncertainty in the MENA region, GCC states were resilient during 2012 and delivered strong and sustainable growth in their economies supported by robust oil prices, government backup of key economic sectors and the attractive investment opportunities driven by the favourable demographic profile and solid stocks that reached to attractive levels along with steady growth in corporate earnings.

Dubai’s government has announced its budget for 2013 with more than AED 34.12 billion expenditures and nearly 8% increase in public revenue. The government is able to reduce the budget deficit to record levels keeping the deficit ratio at less than 0.5% of the GDP, the government said in a statement. The gap in the budget has been reduced by 18% from 2012, where public revenues have been set at AED 32.62 billion.

Qatar’s economic growth slowed in Q3-12 but was supported by strong expansion of non-oil sectors, according to data released by the statistics authority. Gross domestic product in Q3-12, adjusted for inflation, rose 3.9% from Q3-11 and grew 1.7% from Q2-12. That marked a slowdown from Q2-12, when real GDP grew 5% from a year ago, and Q1-12, when growth was 6.9%.

The GCC countries combined nominal GDP is estimated to hit $1.48 trillion in 2012 and grow further by 3.3% to $1.53 trillion in 2013 driven by robust oil prices and government deployment of massive fiscal surpluses to develop non-hydrocarbon sectors. Saudi Arabia remains the region’s largest economy with nominal GDP forecasted to reach $657 billion and $682.6 billion in 2012 and 2013, respectively. Meanwhile, the UAE remains the second largest economy with a nominal GDP forecasted to reach $361.9 billion and $374.9 billion in 2012 and 2013, respectively. Qatar Nominal GDP is forecasted to grow at 6.4% in 2012 to $184.6 billion while Kuwait GDP is forecasted to grow at 8.45% to $174.6 billion.
In Saudi Arabia, despite the slowdown in economic growth, a record budget announced for 2013 coupled with easing concerns regarding the King’s health helped the TASI snap a three month losing streak and end December as the best performing market alongside Muscat Securities Market as they both were up 4.1% with market breadth skewing heavily towards the gainers with an advancer-to-decliner ratio of 133-to-21 and 3 stocks unchanged.
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This recent jump allowed the TASI to end 2012 as the third best performing market with a 5.98% return, following DFM and ADX which jumped a whopping 19.89% and 9.52%, respectively. Accordingly, TADAWUL market capitalization rose 4.66% adding SAR 62.4 billion ($16.6 billion) to reach SAR 1.4 trillion ($373.3 billion) as compared to SAR 1.34 trillion ($356.6 billion) recorded at the end of November-12, as all sectors in the market increased. Market heavyweight Petrochemical Industries added 4.17% to its market cap to reach SAR 439.9 billion ($117.3 billion) while the Banks and Financial sector was up 1.62% to SAR 307.4 billion ($82 billion) and the Telecommunications & IT sector gained 6.49% to SAR 152.8 billion ($40.7 billion). Trading indicators rose during the month with volume traded increasing 28.3% to 4.4 billion shares distributed over 2.9 million transactions while value traded gained 25.6% to SAR 124 billion from SAR 98.7 billion in November-12.

While in Kuwait, the Kuwaiti bourse failed to maintain last month’s bullish momentum, ending December on a negative note, on the back of retail investors booking profits amid a lack of any fundamental data. Despite the fact that investors are speculating that Q4-12 earnings will beat estimates and that the new parliament will support economic development as the Emir had earlier pledged, market movements were still dominated through small cap stocks that made easy gains. Nonetheless, the KSE ended 2012 in the green as the KSE Price Index increased 2.07% to close at 5,934.28, following four consecutive years of losses; whereas the KSE Weighted Index jumped 2.97% to 417.65, while the KAMCO TRW Index was up 2.61%, to close at 2,652.69. During the month of December 2012, the market capitalization of Kuwait Stock Exchange shed 1.53% or around KD  451 million ($1.6 billion) to record KD  29.1 billion ($102.9 billion) at the end of the month, dragged by heavyweight Banking and Telecom sectors losing KD  261.3 million ($924.4 million) and KD  261.3 million ($924.6 million), respectively. Compared to November-12, trading indicators ended the month mixed with volume traded marginally decreasing 0.12% to 7.16 billion shares from 7.13 billion shares in November-12; while value traded rose 22.52% to KD  730 million up from KD  596 million in November-12.

As for Abu Dhabi, the Abu Dhabi Securities Exchange, as measured by ADX General Index, slumped 1.63% in December, trailing all of its GCC peers, on the back of new Central Bank regulations placing a cap on mortgage loans and introduction of government royalty fees to be paid by local telecom operators. On the other hand, the ADX ended as the second best performing market in 2012 following neighbouring Dubai, posting a 9.52% increase in FY-12 as the bourse rebounded from last year’s slump with the local economy showing resilience and growth, while the government has managed successfully with well-studied interventions and reforms helping revive business activity. Liquidity was mixed as volume decreased 10.8% to 1.3 billion shares and value rose 8% AED 1.8 billion. Total market capitalization shed 1.17% to AED 290.2 billion ($79 billion) in December pressured by a 5.52% drop in the telecom sector due to new regulations, which outweighed the positive 2.3% performance of market heavyweight banks sector. Etisalat, the first operator in the Emirates, will be required to pay a fee of 15% on its revenues and 35% on profits from this year to 2016.

In Dubai, after last month’s slight correction, the DFM General Index was able to rebound back to the upside gaining 0.91% in December and ending 2012 as the best performing market among its GCC peers, posting a whopping 19.89% rise on the back of a brighter outlook for Dubai’s property market which has been hit hard during the period 2008-2010 after the breakout of the global financial crisis. Although the UAE Central Bank has introduced new regulations capping mortgage amounts, investors remain upbeat regarding the housing market in the Emirate. Additionally, as the year came to end, investors built positions in stocks amid expectations of increased dividend pay-outs for the year. However, despite the positive performance during the month, the bourse’s market cap shed 0.62% of its value to reach AED 174.6 billion ($47.5 billion) weighed by the real estate & construction and telecom sectors which declined 0.27% and 8.52% to AED 31.6 billion ($8.7 billion) and AED 16.5 billion ($4.5 billion), respectively. Liquidity increased during the month, volume and value jumped 25.4% and 22.4%, respectively, to 2.45 billion shares and AED 2.76 billion, respectively, over 33,381 transactions.
In Qatar, the Qatar Exchange declined for the second consecutive month in December as it was dragged down further by extended profit-booking by local and foreign institutions. Despite the Ministry of Finance expects the economy to grow around 5% in coming years, the QE 20 Index failed to find any support from economic fundamentals on speculations that growth in 2012 more than halved the 14.1% jump witnessed in 2011. As a result, the QE 20 Index shed 0.5% to 8,358.94 adding more to the bourse’s FY-12 losses to reach 4.79%, and end as the second worst performing market in the GCC region following Bahrain Bourse which slumped 6.83%. Market performance was weighed down by the decline in the heavyweight Banking sector which fell 0.73% to QAR 179.5 billion. Nevertheless, market capitalization for the month was up by 0.15% to QAR 459.9 billion supported by the industrial sector, which gained 2.26% to QAR 125.1 billion. Liquidity was relatively flat during the month as volume inched 0.54% higher to 61 million shares, while value traded was up by 0.75% to QAR 2.96 billion spread over 43,950 transactions.

In Bahrain, the Bahrain Bourse ended the month on a positive note, reporting a rise after two consecutive months of decline. The Bahrain All Share index rose by 1.60% to reach 1,065.61. During the month, most of the trading was concentrated on the Investment Sector, which witnessed 15.6 million shares exchanging hands, capturing 45.7% of the total volume on the BSE. In line with Bahrain, other GCC markets recorded gains in their benchmarks this month led by Tadawul All Share Index and MSM 30 Index both recording gains of 4.10%. During the month, market capitalization of the Commercial Banking sector gained 4.44% to reach BHD 2.14 billion compared to BHD 2.05 billion in Nov-12. Market heavyweight Ahli United Bank (AUB) which accounts for 54% of the Commercial Banking sector and 20% of the total Bahraini Bourse in terms of market cap, witnessed its market cap surge 6.4% as its stake sale in Ahli Bank Qatar is soon to be finalized. Whereas another market heavyweight Aluminium Bahrain which accounts for 11%, of the total Bahraini Bourse in terms of market cap, posted a 9.6% fall on m-o-m basis.

Finally in Oman, strong economic fundamentals coupled with heavy buying pressure from pension funds and local investors helped the Omani Bourse end on a positive note and close the month as the best performing market alongside TADAWUL, to increase 4.1% to 5,760.84 points. On an annual basis, the MSM 30 index ended 2012 in the green, registering a 1.15% rise. Accordingly, market breadth skewed heavily towards the gainers with an advancer-to-decliner ratio of 47-to-9 while 4 stocks remained unchanged. Trading indicators jumped with volume surging 127% during the month to 442.5 million shares compared to 195 million in Nov-12, while value traded increased a whopping 82.6% to OMR 104.9 million versus OMR 57.4 million in the previous month. Market heavyweight banking & investment sector gained 5.59% to reach OMR 3.22 billion, supported by the 3.23% and 7.53% rise in sector heavyweights Bank Muscat and Bank Dhofar, respectively; while the services & insurance sector increased 3.07% to OMR 2.5 billion from OMR 2.44 billion and the industrial sector rose 3.57% to OMR 1.25 billion from OMR 1.21 billion.

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