Kuwait: Kuwait Financial Centre “Markaz” released its Monthly Market Review report for July 2024. Kuwait markets ended positive for the month owing to a rebound in the non-oil sector activity, discovery of new oil reserves, and the news pertinent to the government planning to establish a secondary market for trading government bonds. GCC markets remained optimistic, supported by the positive start to the second quarter earnings season in 2024. U.S equities were down for the month, weighed by technology stocks, even as inflation continued to ease.
Kuwait equity market index gained 4.4% for the month, extending the yearly gains to 6.2%. Kuwait’s non-oil GDP bounced back in Q1 2024, rising 4.7% y/y compared to a 2.3% y/y contraction in the previous quarter driven by strong growth in the manufacturing sector, according to Kuwait CSB. Kuwait’s inflation (CPI) eased to 2.8% y/y in June, the slowest pace since November 2020, down from 3.2% y/y in the previous month. The food and beverages component moderated compared to the previous month, but remained elevated at 5.6% y/y in June while growth in housing prices witnessed a notable slowdown to 0.9% y/y. The discovery of 3.2 billion barrels of oil reserves by KPC (Kuwait Petroleum Corporation), equivalent to Kuwait’s oil production over three years added to the positive investor sentiment as higher possible revenue from oil could help in easing budget deficits in the future. Kuwait government has undertaken preliminary steps to establish a market for trading government bonds, according to Arab times. This initiative is expected to support capital expenditure and create a strong ecosystem for debt issuance and trading in Kuwait.
Kuwait banking stocks rose 5.4% during July supported by positive Q2 2024 earnings results. Among banking stocks, Al Ahli Bank of Kuwait (ABK) gained the most at 13.3% during the month following the earnings announcement. ABK registered net profits of KD 29.06 million (USD 95.8 million) in H1 2024, a growth of 22% y/y. NBK and KFH rose 5.7% and 4.5% respectively in July. KFH recorded a net profit of KD 341.2 million for H1 2024, an increase of 2.3% y/y. NBK posted a net profit of KD 145.8 million in Q2 2024, up 3.3% y/y due to higher operating income and lower provisions, that were partly offset by higher operating expenses and higher taxes. Among Premier market stocks, Gulf Cables and Electrical Industries Group gained the most at 21.0% during the month.
The value of real estate transactions in Kuwait rose by 27% y/y to KD 853 million in Q2 2024 owing to sizable one-off deals across the main three segments. However, prices in the residential segment continued to moderate, with prices falling by 3.9% y/y in Q2 2024.
GCC markets were mostly positive during the month, with S&P GCC composite index registering a gain of 3.9% for the month. GCC equity indices, except Oman and Bahrain, registered monthly gains as strong corporate earnings coupled with rising expectation of U.S Fed rate cut in September lent support to the markets. However, the total project awards in the GCC witnessed a decline of 19.7% y/y to USD 51.7 billion in Q2 2024 due to the unprecedented slump of project awards in Qatar coupled with steep fall in UAE contract deals, as reported by Zawya.
Dubai and Abu Dhabi equity indices gained 5.9% and 3.1% respectively during the month, primarily driven by the performance of banking and real estate stocks. The market is expecting strong loan growth and higher NIMs for banks in the region in the near term. The share price of FAB rose 4.7% during July as the bank posted a net profit of AED 4.26 billion in Q2 2024, beating analyst estimates. Emaar Development and Emaar Properties surged 6.1% and 5.2% respectively during the month supported by strong execution and healthy pipeline of projects in H1 2024. Aldar properties’ share price rose 18.1% driven by the appointment of the new CEO. The Saudi Tadawul index rose 3.7% during July despite IMF’s downward revision of Saudi Arabia’s GDP growth by nearly one percentage point to 1.7% for 2024 due to oil production cuts. Saudi Aramco share prices fell 1.1% owing to expectations of a fall in Q2 2024 profits due to lower production. Qatar equity index registered a gain of 1.9% despite the steep fall in natural gas prices.
Global and U.S. markets were mildly positive for the month, with S&P 500 index up by 1.1% as U.S Fed Chair Powell flagged possible interest rate cuts in September citing lower inflation in the FOMC meeting held on July 31st. U.S Personal Consumption Expenditure rose by 2.5% y/y in June, easing down slightly from the 2.6% y/y rise in May 2024. The consumer price index also declined by 0.1% m/m in June, its first monthly decline in four years. The U.S economy grew by 2.8% y/y in Q2 2024, exceeding consensus estimates of 2.0%. Tech-heavy Nasdaq was down by 1.6% for the month amid somber earnings reports from Tesla and Alphabet, and sector rotation to relatively undervalued growth stocks. The MSCI EM index witnessed a marginal loss of 0.1% during the month, weighed by Chinese equities which declined by 1.0% for the month amid banking crisis and slowing economic recovery. China’s economic growth slowed to 4.7% y/y in Q2 2024, down from 5.3% y/y growth in Q1 2024, raising concerns over the country’s economic recovery. The country’s central bank lowered several key rates during the month, in a move to support the economy.
The yield on the 10-year U.S. Treasury note declined by 27 bps during the month closing at 4.09%, as easing inflation and indications from U.S Fed strengthened hopes of rate cut by the U.S Fed. With the 2-year U.S. Treasury note declining by 42 bps to 4.29%, the spread between the 10-year and 2-year note narrowed to 20 bps in July, from 35 bps at the end of June 2024.
Oil price settled at USD 80.7 per barrel, down 6.6% during the month of July. Concerns over global demand amid weakness in China’s economic outlook pressured oil markets. Easing worries over geopolitical tensions also capped prices. Short term outlook on Oil prices remains mixed. Morgan Stanley expects oil prices in the mid-high USD 70 range in 2025 as current tightness in oil market eases into a surplus due to a possible growth in both OPEC and non-OPEC supply. EIA however has a positive outlook, estimating prices to average around USD 89 per barrel in H2 2024, up from an average USD 84 per barrel in H1 2024, based on the agency’s outlook on persistent withdrawals from global oil inventory.
Easing inflation and the gradual slowdown in labour markets continue to strengthen the case for U.S Fed rate cuts. Given the not-so-positive earnings from U.S. tech companies, the U.S markets could see sector rotation to underperforming sectors if subsequent earnings releases exhibit resilience. GCC markets would continue to track upcoming earnings. Further positive indications of rate cuts could support oil prices and GCC equities.
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About Kuwait Financial Centre “Markaz”
Established in 1974, Kuwait Financial Centre K.P.S.C “Markaz” is one of the leading asset management and investment banking institutions in the MENA region with total assets under management of over KWD 1.154 billion as of 31 December 2022 (USD 3.77 billion). Over the years, Markaz has pioneered innovation by developing new concepts resulting in new investment channels. These channels enjoy unique characteristics and helped Markaz widen investors’ horizons. Examples include Mumtaz (the first domestic mutual fund), MREF (the first real estate investment fund in Kuwait), and Forsa Financial Fund (the first options market maker in the GCC since 2005), all conceptualized, established and managed by Markaz. Markaz was listed on the Boursa Kuwait in 1997.
For further information, please contact:
Sondos Saad
Corporate Communications Department
Kuwait Financial Centre K.P.S.C. “Markaz”
Email: ssaad@markaz.com
