Markaz: Most GCC markets positive in June amid oil price gains

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Kuwait City, July 2: Kuwait Financial Centre “Markaz” released its Monthly Market Review report for June 2024. Kuwait’s equity index declined for the month but remains positive on a year-to-date basis. GCC markets were mostly positive, supported by a rise in oil prices. U.S equities were positive for the month amid signs of easing inflation, even as U.S Fed kept rates unchanged during the month.

Kuwait equity markets declined for the month despite recent positive economic data. Kuwait’s PMI for May rose to 52.4, up from 51.1 in April, driven by improved business confidence and expansion in new orders. The month recorded the strongest production growth in last 4 years. The Banking index declined by 1.7% during the month with Warba Bank and Kuwait Finance House (KFH) declining the most by 4.9% and 3.4% respectively. While there were reports of KFH considering investing in Saudi Investment Bank, the bank has clarified stating that while it is studying opportunities to expand into Saudi Arabia, it is yet to zero in on one bank. Among Premier market stocks, Gulf Cables and Electrical Industries Group gained 15.3% and Alimtiaz Investment Group Co declined by 13.3%. Following the completion of its IPO, Beyout Investment Group started trading in Boursa Kuwait as a premier market stock during the month. The stock ended the month in negative, down by 0.4%.

Kuwait’s real GDP contracted by 4.35% y/y in Q4 2023, on the back of a 6.4% y/y fall in real oil GDP amid lower oil production. The non-oil real GDP had declined by 2.3% over the same period. S&P has affirmed Kuwait’s sovereign rating at A+ with a stable outlook in June citing strong fiscal buffers. According to the agency, Kuwait’s GDP had declined by 1.8% y/y in 2023 and is expected further contract by 2.3% in 2024, on account of decline in oil production. Kuwait’s banking sector deposits had reached record high of KD 63.9 billion as of Q1 2024.

Most of the GCC stock market indices were positive during the month supported by the rise in oil price and gains in blue chips. The S&P GCC composite index registered a gain of 2.5% for the month. Foreign capital inflows in the GCC equity markets increased to USD 616.7 million in May, led by growth in UAE and Saudi Arabia.

Saudi equity index gained 1.5% during the month, supported by gains in banking stocks. Saudi National Bank and Al Rajhi bank gained by 7.1% and 5.1% respectively. Fitch expects Saudi Islamic banks’ performance to be strong in 2024 and 2025 amid positive non-oil economic growth and favourable operating conditions. Saudi Aramco’s share price fell by 3.8% during the month following its stake sale amounting to USD 11.2 billion, in which the shares were priced at SAR 27.25. Notably, over half of this has been bought by foreign investors. The Dubai equity index gained 1.3% during the month, supported by gains in blue chips. Emaar Properties gained 7.0% for the month, supported by its planned USD 408 million expansion of Dubai Mall. Emirates NBD gained 6.1% for the month. The bank has partnered with players such as Citi and CARS24 during the month, expanding banking services and channels. The Abu Dhabi equity index gained 2.2% in June. First Abu Dhabi bank gained 7.4% for the month. Aldar Properties gained 13.8% for the month. The company announced the launch of a wellness-focused apartment community during the month. Qatar equity index increased by 7.0% during the month supported by strong non-oil economic activity and stable natural gas prices. The country’s real estate sector has also been performing well over the past couple of months. The number and value of transactions index increased by 60% and 55% respectively in May 2024, compared to April 2024.

Saudi Arabia’s non-oil business activity expanded at a slower pace in May, with growth in new orders falling to a 25-month low. Central Bank of UAE expects UAE’s economy to grow by 3.9% in 2024 and by 6.2% in 2025, amid strong foreign trade performance and ongoing recovery in multiple sectors.

Global and U.S. markets ended the month in green, supported by rally in tech stocks and signs of easing inflations. U.S Personal Consumption Expenditure, while recording a 2.6% y/y gain in May, had remained unchanged on a monthly basis. S&P 500 ended June with monthly gain of 3.5% while the technology-heavy Nasdaq index rose 5.9% in June with chipmaker NVIDIA continuing to post gains. The indices had hit record highs during the month. The Federal Reserve continued to maintain interest rates in the range of 5.25%- 5.5% during the June FOMC meeting. While acknowledging the modest progress in inflation in recent months, the Fed Chair has stated that rate reductions would not be appropriate until the Fed gains greater confidence on continued easing of price pressures. Fed policymakers expect one rate cut this year, down from the earlier expectation of three rate cuts. European Central Bank has cut its interest rate for the first time in five years. The central bank has lowered rates by 25 bps to 3.75%. The MSCI EM index gained 3.6% during the month, driven by Indian equity markets which had gained on the positive investor sentiment. The Chinese equity index was down 3.9% in June amid muted economic data.

The yield on the 10-year U.S. Treasury note were volatile during the month and closed at 4.36%, down by 15 bps from last month’s close on the back of cooling inflation data.

Oil price settled at USD 86.4 per barrel, ending a volatile month with a gain of 5.9%. While the commodity had declined earlier in the month amid OPEC+ plans to ease out production cuts gradually from October 2024-September 2025, it recovered later in the month on geopolitical concerns and rate cut hopes. Natural gas prices registered a mild 0.5% gain in June 2024, following a steep 29.9% rise in May. The positive performance was supported by rising demand for power generation in U.S, concerns over outages in Europe and strong demand from Asia.

With the Fed continuing to maintain interest rates at current levels in June, the question on timing and quantum of rate cuts remains open and would be on the top of investors’ minds in July. Additionally, inflation and labour market statistics – which have given mixed signals- would also be tracked for further indications.

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