KUWAIT/DUBAI/LONDON: Inclusion in an emerging market benchmark and surging oil prices have helped Kuwaiti stocks outshine their regional peers in the past three months, but some major active emerging-market investors are waiting on the sidelines for more reforms.
Kuwait’s main index is up nearly 9 percent in the third quarter, beating other Gulf markets, including oil producers Saudi Arabia and Abu Dhabi, and edging past Qatar, the MSCI emerging market index and Russia.
More good news could be in store. Next year, US index provider MSCI will decide whether to reclassify its Kuwait index from the current frontier-market status to its widely used emerging-market benchmark. Analysts estimate such a move could trigger passive fund flows of $2 billion.
“We expect investor pick-up to be supported by the country’s safe-haven qualities within the wider emerging-market backdrop,” said Salah Shamma, head of investment, MENA, Franklin Templeton Emerging Markets Equity.
Index provider FTSE Russell will include 12 Kuwaiti stocks in two phases — September and December 2018 — which will result in a weighting of just over 0.5 percent in its FTSE Emerging All Cap index. Franklin Templeton’s Shamma calculates this will translate into passive inflows of $1 billion.
Boursa Kuwait, which took control of the Kuwait stock exchange in early 2016, introduced a number of reforms such as relaxing listing rules, delisting companies seen unfit for public investment and segmenting the market with different disclosure requirements.
But not all funds are convinced about Kuwait’s equities story, which was a long time coming for the region’s oldest bourse. The Kuwaiti economy has benefited from a surge in oil prices, which rose percent to a four-year high on Monday. Depending on oil can be a disadvantage, however.
“We have been looking at Kuwait for quite some time – but it is a one-trick pony: oil, oil, oil,” said Wim-Hein Pals, head of emerging markets at Rotterdam-based fund manager ROBECO, which manages about $25 billion in emerging-market funds.
He said Kuwait is not interesting enough in a diversified emerging-market portfolio for anyone who can find dynamic oil companies in other markets.
“It will remain on our radar and if we find something like an oil company at attractive valuations, we will jump onto it,” said.
Like its Gulf neighbors, Kuwait has kept its national oil company, Kuwait Petroleum Corp, out of public markets. The exchange’s trading is dominated by financial services and real estate companies.
“Certainly, if you wanted to put in large amounts of money and a large percentage of your portfolio, you would end up with very, very big positions in not very many companies,” said Andrew Brudenell, frontier markets portfolio manager at Ashmore in London.
Saudi Arabia was the only Gulf country that promised to list its national oil giant, Aramco, but that move was shelved, dashing investor expectations about more privatization in the kingdom and in the Gulf region.
Other funds contacted by Reuters said they will start looking at Kuwait after it has been added to the MSCI emerging market index.
“The whole region has been witnessing a major transformation when it comes to markets operationally and improvement with friendliness to investors,” said Fadi Al-Said, director, fund manager, head of the MENA investment team at Lazard Asset Management.
Kuwait may have to do more to diversify its economy and widen its appeal to investors to sectors beyond real estate and banking, said Ali Al-Salim, co-founder of Dubai-based Arkan Partners, a consulting firm specializing in alternative investments.
“Investor interest in Kuwait is limited by our stock market’s diversity. Seven out of the 10 largest listings are banks,” Al-Salim, a Kuwaiti national, said.
“Seeing how consumption is a huge part of Kuwait’s local economy, it would be nice to see more public consumer-orientated listings,” he said. “This would require many more family-run businesses to go public, and today there’s not a clear case for them wanting to.”
Politics in Kuwait could also be tricky. The country has an influential parliament, where government officials are often grilled about policy moves.
The government has been pushing lawmakers to speed up legislation aimed at increasing the liquidity at Kuwait’s General Reserve Fund, one of two funds managed by the Kuwait Investment Authority, and approve a law to allow the government to issue long-term sovereign bonds.
Kuwait has yet to implement a value-added tax, but the bill that would enable more diversified revenues for the government is highly controversial and expected to face a public backlash.
“What MP will approve tax? If you approve tax, you will not get voted in next year, but Kuwait needs far-sighted people,” said a Kuwaiti banker, who declined to be named.
A senior banker said the government is becoming more receptive to foreign portfolio investment.
“Before they were looking at it, like no, we have money and we invest outside,” said Abdul Wahab Al-Majed, chief executive of Kuwaiti lender Boubyan Bank. “And now they know the difference that this money can do for it. Especially now for the stock exchange.”
Kuwait stocks shine in the third quarter as market reforms pay off
Kuwait stocks shine in the third quarter as market reforms pay off
- Kuwait’s main index is up nearly 9 percent in the third quarter, beating other Gulf markets
- ‘We expect investor pick-up to be supported by the country’s safe-haven qualities within the wider emerging-market backdrop’
Oil Updaates — prices ease from near 3-mth highs amid strong dollar ahead of economic data
- Brent crude futures slid 21 cents, or 0.3%, to $76.3 a barrel
- Dollar stayed close to a two-year peak on Monday
SINGAPORE: Oil prices slid on Monday amid a strong US dollar, concerns over sanctions and ahead of key economic data by the US Federal Reserve and US payrolls later in the week.
Brent crude futures slid 21 cents, or 0.3 percent, to $76.3 a barrel by 7:45 a.m. Saudi time after settling on Friday at its highest since Oct. 14.
US West Texas Intermediate crude was down 19 cents, or 0.3 percent, at $73.77 a barrel after closing on Friday at its highest since Oct. 11.
Oil posted five-session gains previously with hopes of rising demand following colder weather in the Northern Hemisphere and more fiscal stimulus by China to revitalize its faltering economy.
However, the strength of the dollar is on investor’s radar, Priyanka Sachdeva, a senior market analyst at Phillip Nova, wrote in a report on Monday.
The dollar stayed close to a two-year peak on Monday, a stronger dollar makes it more expensive to buy the greenback-priced commodity and hence reins in pressure on oil.
Investors are also awaiting economic news for more clues on the Federal Reserve’s rate outlook and energy consumption.
Minutes of the Fed’s last meeting is due Wednesday and the December payrolls report will come on Friday.
Also weighing on sentiment was supply disruptions of Iranian and Russian oil as Western countries ramped up their sanctions.
The Biden administration plans to impose more sanctions on Russia over its war on Ukraine, taking aim at its oil revenues with action against tankers carrying Russian crude, two sources with knowledge of the matter said on Sunday.
Goldman Sachs expects Iran’s production and exports to fall by the second quarter as a result of expected policy changes and tighter sanctions from the administration of incoming US President Donald Trump.
Output at the OPEC producer could drop by 300,000 barrels per day to 3.25 million bpd by second quarter, they said.
The US oil rig count, an indicator of future output, fell by one to 482 last week, a weekly report from energy services firm Baker Hughes showed on Friday.
Still, the global oil market is clouded by a supply surplus this year as a rise in non-OPEC supplies is projected by analysts to largely offset global demand increase, also with the possibility of more production in the US under Trump.
UAE’s non-oil activity sees PMI hit 9-month high; Egypt’s output declines: S&P Global
RIYADH: Non-oil business activity in the UAE surged in December, with the Emirates’ Purchasing Managers’ Index jumping to a nine-month high of 55.4, up from 54.2 in November, an economy tracker showed.
According to S&P Global, the robust expansion was driven by strong demand conditions, underscoring continued growth in the non-oil private sector.
The performance aligns with the UAE’s broader diversification strategy under its Vision 2031, which focuses on expanding the non-oil sector and promoting industries such as manufacturing, tourism, and technology to ensure sustainable economic growth.
“The UAE saw its best expansion in non-oil business conditions for nine months in December, with the latest PMI data closing out another year of continuous growth and putting the sector in a strong position for 2025,” said David Owen, senior economist at S&P Global Market Intelligence.
Any PMI readings above 50 indicate growth in the non-oil sector, while readings below 50 signal contraction, S&P Global noted.
Non-oil business owners surveyed said buoyant market conditions helped them secure new clients and larger order books. However, staffing levels rose at one of the slowest rates in more than two-and-a-half years.
“Capacity levels remain under considerable stress, however, illustrated by another marked increase in backlogs of work. Recruitment appears to be the limiting factor — the pace of employment growth was barely changed from November’s 31-month low,” said Owen.
He added that rising costs and margin pressures discouraged firms from ramping up staffing levels despite growing workloads.
Input costs increased during December, although inflation eased to its softest pace since March. Meanwhile, optimism among non-oil firms about future growth ticked down for the second consecutive month.
Dubai’s PMI also reached a nine-month high of 55.5 in December, up from 53.9 in the previous month.
The emirate saw faster expansions in output and new orders, reflecting stronger client demand and busy market conditions.
“In both cases, rates of growth were stronger than those observed at the UAE level,” said S&P Global.
However, the report highlighted weaker optimism among non-oil business firms in Dubai regarding the coming year, with confidence falling to its lowest level since May 2021. Only 6 percent of surveyed companies anticipated output growth in 2025.
The UAE’s performance highlights the success of economic diversification strategies across Gulf Cooperation Council nations, which continue to reduce reliance on oil revenues.
The region’s positive trend extended to Saudi Arabia, where the December PMI hit 58.4, driven by a sharp increase in new orders. The Kingdom’s PMI has remained above the neutral 50 mark since September 2020, underlining sustained expansion in the non-oil private sector.
Egypt’s PMI falls below 50
In contrast, Egypt’s PMI dropped to 48.1 in December from 49.2 in November, signaling a sharper contraction in private sector activity. Subdued client demand led to the steepest decline in output in eight months, particularly in the construction, wholesale, and retail sectors.
The analysis noted that activity in the services sector remained relatively stable, benefiting from a steadier level of new business compared to other monitored sectors.
“The latest Egypt PMI data showed that the non-oil private sector’s anticipated recovery is unlikely to be without its setbacks in 2025. With the Egyptian pound deteriorating against the US dollar, breaching the 50-per-dollar mark in early December, businesses reported higher prices and a slump in demand, leading to the fastest decline in operating conditions since last April,” said Owen.
He added: “The downturn meant that firms were less keen to raise their own charges in the face of accelerating cost burdens, instead tightening their margins in a bid to salvage orders.”
Egyptian businesses expressed improved optimism toward the end of 2024, anticipating better domestic and geopolitical conditions in 2025. However, inflationary concerns remained a significant headwind for many firms.
Kingdom approves 2025 annual borrowing plan with $37bn funding target
- Strategic road map to manage country’s funding needs
RIYADH: Saudi Arabia’s Minister of Finance Mohammed Al-Jadaan on Sunday approved the annual borrowing plan for 2025, outlining a strategic road map for managing the Kingdom’s funding needs.
The plan, which has been endorsed by the National Debt Management Center’s board of directors, detailed developments in public debt in 2024, initiatives to strengthen local debt markets, and the 2025 funding framework, including a calendar for Saudi riyal-denominated sukuk issuances.
The projected funding requirement for 2025 is estimated at SR139 billion ($37 billion), according to a statement issued on Sunday.
The total encompasses two primary components: covering a fiscal deficit of SR101 billion, as highlighted in the Ministry of Finance’s official budget statement, and meeting the SR38 billion in principal repayments for debts maturing during the year.
To achieve its funding objectives, Saudi Arabia plans to enhance its access to both local and international financing channels and pursue innovative financing opportunities to stimulate economic growth, the statement added.
Moves will include private transactions such as export credit agency-backed initiatives, financing for infrastructure development, and capital expenditure projects.
The Kingdom will also explore opportunities to access new markets and issue debt in diverse currencies, depending on market conditions.
Closing Bell: Saudi main index slips to close at 12,069
RIYADH: Saudi Arabia’s Tadawul All Share Index fell on Sunday, shedding 32.73 points, or 0.27 percent, to close at 12,069.82.
The total trading turnover for the benchmark index amounted to SR4.21 billion ($1.12 billion), with 119 stocks advancing and 106 retreating.
The Kingdom’s parallel market Nomu registered a gain of 48.69 points, or 0.16 percent, closing at 31,054.38. Out of the stocks listed on Nomu, 38 advanced while 41 declined. The MSCI Tadawul Index also declined, dropping 7.32 points, or 0.48 percent, to close at 1,509.84.
Among the top performers of the day was Saudi Reinsurance Co., whose stock surged 9.94 percent to SR59.70.
Salama Cooperative Insurance Co. also posted a strong performance, with its share price rising 8.44 percent to SR21.06, while Riyadh Cables Group Co. saw its stock climb 6.34 percent to SR151.00.
However, National Medical Care Co. recorded the day’s steepest decline, falling 3.49 percent to SR160.40. Emaar The Economic City and the Power and Water Utility Co. for Jubail and Yanbu also experienced losses, with their share prices dropping 3.06 percent to SR18.38 and 2.93 percent to SR53.00, respectively.
In corporate news, Al-Yamamah Steel Industries Co. announced the signing of a SR97.5 million contract with the Saudi-based Trading & Development Partnership. The agreement involves the supply of steel towers for constructing a 380-kilovolt ultra-high voltage transmission line in the Eastern Region.
The contract, which will commence in May 2025, is expected to reflect on the company’s financial results starting from the third quarter of 2025.
Shares of Al-Yamamah Steel ended the session 6.25 percent higher at SR36.40.
The Saudi Industrial Development Co. disclosed that its subsidiary, Global Co. for Marketing Sleeping Systems, also known as Sleep High, has secured a Shariah-compliant SR9 million credit facility from Riyadh Bank.
The financing, guaranteed under the Kafalah Program, will be utilized to support the subsidiary’s working capital needs. SIDC shares closed 0.67 percent higher at SR30.00.
Saudi Arabian Amiantit Co. signed a memorandum of understanding with the Libyan Development & Reconstruction Fund to collaborate on water technology transfer, sewage treatment, and pipe production.
The one-year agreement aims to localize industries in Libya, create employment opportunities, and transfer manufacturing expertise. It also includes plans to establish joint factories specializing in fiberglass and polyethylene pipes, as well as valves, to support Libyan national projects.
Shares of Amiantit rose 1.90 percent to close at SR29.40.
United International Holding Co. announced the extension of its memorandum of understanding with Nowpay Corp. for an additional two months. The partnership aims to establish a payroll administration and processing firm in Saudi Arabia.
The venture, which will require an initial investment of SR75 million, will be 75 percent owned by United International Holding and 25 percent by Nowpay Corp.
The company’s stock closed 0.75 percent higher at SR187.40.
National Gypsum Co. revealed that it has signed an Islamic financing agreement with Riyadh Bank valued at SR35 million. The funds will be directed toward expanding operations and upgrading production lines. The financing will last for one and a half years and is backed by promissory notes and a property mortgage.
The company’s share price remained unchanged at SR22.16.
Saudi listed firms see growth in 2024 with ACWA Power and Al Rajhi as top performers
RIYADH: Saudi Arabia’s listed companies witnessed significant growth in 2024, with ACWA Power and Al Rajhi Bank emerging as the top performers on the Tadawul All Share Index.
ACWA Power Co. led the index, contributing 295 points, followed by Al Rajhi Bank with a 207-point increase, according to data from SNB Capital cited by Al-Ekhbariya.
ACWA Power’s stock surged from SR255.89 at the start of 2024 to SR401.4 by year-end, reflecting big growth. Similarly, Al Rajhi Bank’s stock rose from SR86.8 to SR94.6 during the same period. Other notable contributors included Saudi Research and Media Group, adding 44 points to the index, Elm Co. with 43 points, and Ma’aden with 40 points.
However, not all listed companies experienced gains in 2024. Saudi Aramco recorded a significant decline, losing 177 points on the index as its stock price dropped from SR140 to SR111.8. SNB Capital fell by 70 points, followed by SABIC with a 62-point decrease, Banque Saudi Fransi with 32 points, and Sahara International Petrochemical Co., or Sipchem, with 30 points.
The Kingdom’s initial public offering market also saw robust activity in 2024, with 14 IPOs raising SR14.21 billion ($3.7 billion), marking a 19 percent year-on-year increase.
Almoosa Health and Fakeeh Care Group led the IPO market in terms of size, with Fakeeh attracting the highest individual participation, drawing 1.34 million unique investors.
Despite overall success, individual subscriptions accounted for only 13 percent of the total IPO volume, amounting to SR1.94 billion.
Modern Mills Co. led in subscription coverage, achieving a rate of 21.9 times, while the average individual coverage for the year’s IPOs stood at 11.87 times.
The food production sector dominated IPO activity, contributing 26.9 percent of total listings in 2024, with successful debuts by companies such as Modern Mills, Al-Rabie, and Al Arabiya.
IPO valuations varied significantly, with an average price-to-earnings ratio of 34 times. United International Holding recorded the lowest P/E, while Nice One topped the charts with a P/E of 118 times, making it the year’s most expensive IPO.
Looking ahead, SNB Capital forecasts an 8 percent annual profit growth for companies listed on the Tadawul in 2025, with the petrochemical sector expected to lead the way with a 74 percent rise in profits.
