Global Research GCC Market Performance Markets - GCC November 2015 GCC Markets Performance – October 2015 GCC markets traded mixed during October on mixed corporate results Trading improved, except in the UAE and Bahrain Market capitalization declined 1.4%MoM in October GCC markets close mixed in October GCC markets ended mixed in October due to mixed sentiments over corporate earnings across markets. Markets remained volatile during the month. Trading remained thin during the holidays for Hijari New Year. The MSM30 was the major gainer (2.4%MoM), followed by the QE (1.2%MoM) and the KSE (0.9%MoM). The ADX was the biggest loser (-4.0%MoM), followed by the TASI (-3.8%MoM), the DFM (-2.5%MoM) and the BSE (-2.0%MoM). Combined market capitalization drops 1.4%MoM The combined market capitalization of GCC bourses declined 1.4%MoM to USD930.5bn in October from USD944.1bn in September. The Saudi bourse, which recorded a 2.3%MoM fall in market capitalization, accounted for the largest share (USD433.5bn or 46.6%). Qatar accounted for USD168.1bn (18.1%), while Abu Dhabi and Dubai constituted USD200.4bn (21.5%) of the total. Kuwait, Oman, and Bahrain together contributed USD128.5bn to the total. GCC trading increase in October Trading across GCC markets improved in October. The volume of shares traded rose 1.1%MoM; however, trading volumes across markets remained low due to the Hijari New Year holidays. Value traded increased 13.7%MoM due to a rise in trading value across countries, except the UAE and Bahrain. Moreover, trading was volatile due to mixed corporate earnings. Market Performance in October 2015 110 GCC Markets 107 104 101 98 95 1-Oct-15 5-Oct-15 9-Oct-15 13-Oct-15 17-Oct-15 21-Oct-15 25-Oct-15 29-Oct-15 Saudi Qatar Kuwait (Price) KWSE (Weighted) Abu Dhabi Dubai Oman Bahrain MSCI EM Index MSCI World Index Indices % Chg (MoM) % Chg (YTD) KSE Price Index 0.9% -11.6% Tadawul All Share Index -3.8% -14.5% DFM Index -2.5% -7.2% ADX Index -4.0% -4.6% Bahrain All Share -2.0% -12.4% QE Index 1.2% -5.5% MSM30 Index 2.4% -6.5% Global Investment House Source: Zawya, Bloomberg, Reuters & Global Research www.globalinv.net Global Research – GCC GCC Markets GCC Aggregate Market Capitalization Market Cap (USDbn) Market Cap (USDbn) % Chg % of total Country October 2015 September 2015 (MoM) October 2015 Kuwait 85.0 85.4 -0.5% 9.1% Saudi Arabia 433.5 443.6 -2.3% 46.6% Abu Dhabi 112.9 115.6 -2.4% 12.1% Dubai 87.5 89.0 -1.6% 9.4% Qatar 168.1 167.1 0.6% 18.1% Oman 23.7 23.3 1.7% 2.5% Bahrain 19.8 20.1 -1.6% 2.1% Total GCC 930.5 944.1 -1.4% 100.0% Source: Respective stock exchanges, Zawya and Global Research GCC Aggregate Trading Activity Country October 2015 September 2015 Value traded As a % of total Value traded As a % of total Volumes (mn) Volumes (mn) (USDbn) value traded (USDbn) value traded Bahrain 0.01 28.0 0.0% 0.06 86.3 0.2% Kuwait 0.69 2,647.0 2.3% 0.68 2,460.2 2.6% Oman 0.21 378.21 0.7% 0.17 237.36 0.6% Qatar 1.58 167.5 5.2% 1.50 126.5 5.7% Saudi Arabia 25.19 4,240.7 83.4% 21.16 3,574.7 79.7% UAE 2.52 5,126.9 8.3% 2.99 5,966.4 11.3% GCC Total 30.20 12,588.2 100.0% 26.56 12,451.6 100.0% Source: Respective stock exchanges, Reuters, Zawya & Global Research GCC markets volatile in October; long-term fundamentals remain stable GCC markets ended mixed in October due to varied corporate earnings results for 9M15 across bourses. Globally, investor sentiments improved due rebound in oil price, monetary easing in China, more expected stimulus from European Central Bank (ECB) and Fed’s statement of expected rate hike in December; these affected GCC markets as well. However, trading volume was thin due to the Hijari New Year holidays. Despite the volatility in oil prices, we believe the outlook for GCC economies will remain intact in the long term, supported by stable growth in infrastructure expenditure and diversification into non-oil sectors. Although all GCC countries have been recording a deficit/lower surplus during the past nine months, local governments are committed to essential developmental activities to diversify their economies away from the oil to the non-oil sector, which would boost revenue. Furthermore, some of the countries are already planning to overcome their deficits by increasing taxes and issuing bonds, which would cut down the shortfall. Net-net, oil-dependency of GCC economies would reduce gradually over the next few years. In terms of valuation, the one-year forward PE ratio of GCC markets stands at 10.3–13.2x, broadly lower than that of emerging market peers. Major GCC markets, such as the UAE and Qatar, are a part of the MSCI Emerging Markets Index. Furthermore, the KSA is likely to be included in the index in 2017. FTSE upgraded Qatar to Secondary Emerging Market from Frontier Market in September 2015. Given these developments, the growth outlook for the stock market appears positive. 2 Global Research – GCC GCC Markets GCC Market Valuation – EPS Growth versus Price to Earnings 20% Dubai Japan 15% 10% 5% Qatar Kuwait India China 0% 5.0x 7.0x 9.0x 11.0x 13.0x 15.0x 17.0x 19.0x Abu Dhabi US -5% Hong Kong Saudi Arabia Oman -10% year EPS growthforwardyear 1 Egypt UK -15% -20% 1 year forward PE Source: Bloomberg & Global Research Fed’s statement of expected rate hike in December, easing concerns over China boost investor sentiment In October, global equity markets rallied, following negative investor sentiment in the past two months. The rally was due to a rebound in oil prices and easing concerns over China. An expected stimulus from the ECB and a possible rate hike by the US Federal Reserve in December boosted investor sentiments. Meanwhile, mixed corporate earnings kept trades volatile. US markets closed the month in the green owing to the US Federal Reserve’s statement of raising the interest rate in December. Mixed corporate earnings and positive economic data improved investor sentiment. In the US, consumer spending marginally rose in September. Employment cost increased in 3Q15, while the Chicago PMI rebounded in October. Improving oil prices helped to lift up investor sentiments. Moreover, easing concerns over China improved trading activity. European markets closed in the green at the end of the month on hints of additional quantitative easing measures from the ECB. Furthermore, the US Federal Reserve’s statement of raising the interest rate in December supported the market movements. Mixed corporate earnings were reported during the month. Asian markets closed higher in October due to positive global cues and easing concerns over China. Investor sentiment in the region improved as the economic outlook for China stabilized and the country’s central bank cut borrowing rates to support the economy. 3 Global Research – GCC GCC Markets Bahrain BSE falls 2.0%MoM in October BSE declined 2.0%MoM in October after falling 1.8%MoM in September and 2.4%MoM in August. The market activities remained mixed over the earning results; however, concerns over volatility in oil prices continued to weigh on the market. Positive global cues partially offset the negative investor sentiments. The market witnessed a steep fall during the first half of the month and attempted to recover during the next half. On YTD basis, the market lost 12.4%. According to the government release, Bahrain’s total financial reserves for the financial year ended 2014 stood at USD501.369mn compared with USD412.123mn in 2013. BSE – Index and Volume Performance and Sectoral Performance 1,280 4.0 1,275 3.5 BSE -2.0% 1,270 3.0 1,265 Hotel & Tourism 2.1% 1,260 2.5 Services 0.0% 1,255 2.0 mn in 1,250 1.5 Insurance -1.4% 1,245 1.0 1,240 Commercial Banks -1.6% 1,235 0.5 Investment 1,230 0.0 -3.4% Industrial -5.0% 1-Oct 6-Oct 11-Oct 14-Oct 20-Oct 27-Oct -8% -3% 2% 7% Volume (RHS) Index (LHS) Source: Zawya, Gulfbase & Global Research Sectoral performance In October, four sectors ended in the red, while one closed higher and one ended flat. Industrial (-5.0%MoM) topped the losers, followed by Investment (-3.4%MoM), Commercial Banks (-1.6%MoM), and Insurance (-1.4%MoM). Services closed flat; Hotel & Tourism (2.1%MoM) was the sole gainer during the month. The Industrial sector declined due to weakness in Aluminium Bahrain Co. (-5.2%MoM). The Investment sector contracted due to a fall in Khaleeji Commercial Bank (-3.3%MoM), Albaraka Banking Group (-3.9%MoM), and Arab Banking Corporation (-11.5%MoM). Heavyweight sector Commercial Banks ended the month in the red, primarily led by Al Ahli United Bank (- 1.4%MoM), followed by BBK (-1.4%MoM) and Bahrain Islamic Bank (-25.2%MoM). Hotel & tourism grew, driven by a 3.1%MoM rise in Gulf Hotels Group. Trading declines in October Trading on the BSE declined in October. Volume traded decreased to 28.0mn shares from 86.3mn shares last month, while trading value reduced to USD0.01bn from USD0.06bn.