Kuwait City, May 4: Kuwait Financial Centre “Markaz” released its Monthly Market Review report for the month of April 2024. Kuwait and broader GCC markets were pressured by the escalation in geopolitical tensions while corporate earnings and positive economic outlook from World Bank lent some support. Global markets declined for the month as persistent inflation in the U.S. led to concerns about possible delays in interest rate cuts by the U.S. Fed.

The report stated that Kuwait equity market declined for the month, pressured by geopolitical tensions. However, positive Q1 2024 earnings cushioned the market decline. Boursa Kuwait All Share (PR) index fell 3.8% in April amid broad-based declines. The Banking index declined 2.3% during the month with Gulf Bank and Burgan Bank losing the most, at 8.2% and 6.8% respectively. Gulf Bank received Central Bank of Kuwait’s approval to extend its right to buy, sell or dispose of 10% of the bank’s shares for another six months. NBK share prices declined by 4.4% for the month despite posting a 9.2% y/y increase in net profit to KD 146.6mn in Q1 2024. Among Premier Market stocks, Boubyan Petrochemical and Mezzan Holding Company were the top gainers for the month, rising by 10.1% and 8.8%. Mezzan’s Holding positive performance was driven by its return to profitability in FY2023. Agility had declined the most among premier market stocks at 13.2%. The company’s subsidiary Agility Global would be listing in the Abu Dhabi Stock Exchange in May 2024.

Kuwait’s economic growth (real GDP) projection for 2024 was revised by the World Bank to 2.8% y/y, higher than the 2.6% y/y forecasted earlier in January 2024 owing to expectations of phasing out of OPEC+ production cuts. However, the IMF has estimated Kuwait’s real GDP to contract by 1.4% in 2024, under the assumption that oil production cuts will continue into 2024, making it the only GCC economy which is expected to contract in 2024. Kuwait’s CPI rose by 3.02% in March with food and beverage segment rising by 5.71%. According to data from the Ministry of Finance, Kuwait’s project spending during 2023-24 had been at KD 345 million, amounting to a third of the planned capital expenditure of KD 1.1 billion. Project activity had also been muted in Q1 2024, with the value of project awards amounting to USD 327 million, down from USD 1.8bn in Q1 2023. However, going forward, the project market is expected to be active with contractors preparing for big-ticket projects. Real estate sales in Kuwait declined by 2.3% y/y in Q1 2024, with residential and investment segments declining by 2.8% and 3.9% respectively, amid the high interest rate environment.

Most GCC markets were negative during the month as geopolitical concerns persisted. The S&P GCC composite index declined by 1.4% in April 2024. The dimming economic outlook amid status quo on production cuts and geopolitical tensions weighed on markets. The IMF has estimated GCC’s real GDP growth for 2024 at 2.4%, revised down from 3.7% forecasted in October 2023, citing production cuts, geopolitical tensions, and shipping disruptions in Red Sea. However, the agency expects growth to rebound to 4.9% in 2025 driven by strong non-oil economic activity and a pickup in hydrocarbon production.

Saudi equity index fell by 0.1% during the month even as strong corporate earnings lent support to markets. Saudi Aramco fell 2.4% during the month. Al Rajhi Bank and Saudi National Bank (SNB) fell 2.9% and 6.5% respectively during the month. Al Rajhi bank has reported a 6% y/y increase in its net profit for Q1. The Dubai equity index declined by 2.1% during the month. The share price of Emirates NBD declined by 2.9% despite its net profit for Q1 2024 rising by 12% y/y. The rise in net profit was supported by higher income and recoveries on impaired loans. Salik Company declined by 7.5% for the month. The Abu Dhabi equity index declined by 1.7% during the month. FAB’s shares fell 5.6% during the month. Qatar equity index fell 1.2% even as natural gas prices staged a recovery.

Saudi Arabia’s revenue from the non-oil sector had amounted to USD 453 billion in 2023, the highest level in the country’s history. According to UAE’s PMI survey, while business conditions have been robust, businesses are facing administrative delays and increased supply constraints due to the Red Sea shipping crisis.

Global and U.S. markets were negative for the week as sticky inflation dampened rate cut hopes. MSCI World index and S&P 500 indices declined 3.9% and 4.2% respectively in April. U.S CPI rose 3.5% y/y in March compared to 3.2% y/y in the previous month, slightly higher than the 3.4% forecast from the Dow Jones consensus. The U.S Personal Consumption Expenditure for March rose by 2.7% y/y in March, up from 2.5% in February. In addition to sticky inflation, slower than expected U.S GDP growth for Q1 2024 at 1.6 y/y also weighed on market sentiments. Google’s parent company, Alphabet, has reported better than expected Q1 2024 earnings and has also announced its first dividend payment. The MSCI Emerging Market index rose 0.3% during the month. Chinese equities (SSEA) edged up 2.1% during the month supported by stimulus hopes, positive economic growth and measures to improve the markets. China’s Q1 2024 GDP was up by 5.3% y/y, well above analysts’ forecast of 4.6%.

IMF has forecasted the global economy to grow by 3.2% in 2024, marginally up from the 3.1% projected in January 2024. Weak demand in China and Europe, and the escalation in Middle East tensions pose key risks, while stronger-than-expected job market and consumer spending in the U.S. are lending support to growth expectations.      

The yield on the 10-year U.S. Treasury note edged up during the month and closed at 4.69%. Strong retail sales data and an uptick in inflation numbers have driven up yields during the month.   

Oil price settled at USD 87.9 per barrel, recording a monthly gain of 0.4%. The commodity had reached six-month highs during the month supported by geopolitical tensions and OPEC+ decision to maintain status quo on extending production cuts until June 2024. OPEC+ has also insisted some countries improve compliance to output cuts. However, factors such as weak growth momentum in China capped gains. Gold prices rose by 2.4%, closing at USD 2,285.6/oz., amid worsening geopolitical conflicts and sticky inflation. Natural gas prices rose 12.9% during the month as concerns pertaining to the impact of the ongoing conflicts on LNG exports from Qatar and increase in U.S electricity output supported prices.

The U.S Fed’s policy meeting in May could provide a much-needed direction to the global markets as sticky inflation has increased speculations that interest rates could remain longer than previously anticipated. Additionally, geopolitical developments would also need to be carefully monitored as it could lead to short-term volatility in markets.