Muscat: The S&P GCC index ended higher by 2.2 per cent in July, pushing the year to date returns to 12.4 per cent, according to a new report.
Both MSCI EM (emerging market) and MSCI World were positive for the month, as they gained 1.7 per cent and 3.1 per cent, respectively, Kuwait Financial Centre (Markaz) said in its recently released Monthly Markets Review report.
The performance of the S&P GCC index was supported by strong performance of banking stocks across the region. Qatar’s index was the best performer in the region for July, with monthly gains of 8.9 per cent, pushing its year to date returns to 15.3 per cent. This was in sharp contrast to the Oman market, which lost 5.1 per cent for the month, extending its losses to 15.0 per cent for the year.
The Markaz report also stated that the second half of the year began on a good note for the stock markets of Kuwait and its regional peers, as they continue to yield positive results. Kuwait markets registered a positive performance for the month of July, as its All Share index gained 5.7 per cent, propelling its year to date gains to 9.6 per cent.
Among Kuwait’s blue chip companies, Zain, Kuwait Financial House (KFH) and National Bank of Kuwait (NBK) were the best performers, gaining 11.7 per cent, 8.2 per cent and 8.0 per cent, respectively, in July. The positive investor sentiment prevailing over banking stocks, on the back of promising second quarter 2018 results, have aided the performance of Kuwait’s leading banks.
In addition, the impending merger of KFH with Ahli United Bank has also had a positive impact on investors, after an announcement was made by KFH regarding the appointment of HSBC and Credit Suisse to help arrive at a fair share exchange ratio. The announcement regarding Kuwait’s potential MSCI upgrade at the end of June boosted the country’s blue chips, which posted impressive gains at the start of July and sustained them until the end of the month.
The Markaz report stated that Industries Qatar and Qatar National Bank were the top performers among blue chip companies, rising by 16.4 per cent and 15.1 per cent during the month, respectively. With four of Qatar’s top six companies being banks and one of the other two being Industries Qatar, the positive macroeconomic conditions, such as the rise in interest rates and high oil prices, have had a major influence on the country’s stock index. Qatar markets were also boosted by the decision of Moody’s to change the country’s sovereign outlook from negative to stable.
The report added that oil prices witnessed a fall of 6.5 per cent during the month, as the price of Brent crude settled down at $74 per barrel, reducing the year to date gains to 11 per cent. Oil prices hovered around the $80 per barrel mark at the start of the month, due to supply disruptions from Venezuela and Iran. The increased supply from Saudi Arabia and Russia helped ease demand and bring down oil prices to a lower, yet healthy level. The Organisation of Petroleum Exporting Countries (Opec) released its initial forecast for oil supply and demand in 2019 during the month. According to the forecast, demand for oil is expected to breach the 100 million bpd threshold for the first time.
Mena market trends
The Markaz report said major banks in the Gulf Cooperation Council (GCC) region have posted solid earnings for the second quarter of 2018. Profitability of banks and financial institutions in the region have been boosted by rising interest rates, an uptick in economic activity and increased government spending.
Meanwhile, Saudi Arabia has been proactive in launching initiatives that help in improving the business environment of the country. Initiatives include the introduction of a new draft law to regulate public and private partnerships, in addition to the earlier proposed bankruptcy law, which is expected to come into effect by August. These laws are expected to remove regulatory impediments for doing business in the country and bring in more foreign inflows into the country’s private sector.