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1. Kuwait Stock Exchange’s Liquidity Features (January – August 2015) 2. The Monthly Report of the State, Financial Administration Accounts –
July 2015
3. Oil, Sustainability and Stability
4. Burgan Bank Financial Results – First Half 2015 5. The Weekly Performance of Kuwait Stock Exchange
Economic Research Unit ALSHALL Consulting Co.
Salhiya – Sahab Tower – Floor 9 – Kuwait Tel: + 96522451535 – Fax: +96522422619 Email: [email protected]
Web site: www.alshall.com
Twitter: @ALSHALL_Com
1. Kuwait Stock Exchange’s Liquidity Features (January – August 2015) Market liquidity during August 2015 achieved a daily trading average value worth KD 13.6 million, a rise by 24.8% compared with the average daily trading value for July 2015 which was at KD 10.9 million. However, this liquidity declined by -31.3% compared with August 2014. During last month, the market added liquidity in the amount of KD 300.1 million bringing the total market liquidity in 8 months to KD 2.929 billion (KD 4.042 billion in the first 8 months of 2014), a drop by -27.5%.
Adopting the same measurement tool, i.e. following up the share of the top 30 companies out of trading value, we note a noticeable decline in liquidity deviation despite its unjustifiable continuity. Those companies captured about 72%, equal to KD 2.110 billion, of market liquidity representing 62% of its total capital value.
The number of speculation companies within the sample was 17 companies which captured 33.8% of total market trading value, i.e. KD 989 million, while their market value equaled 5% of total market companies’ value.
This drop in concentration on speculation companies extended to their shares turnover though it remained high. While the turnover average for all market companies continued weak at about 11.1% (16.6% on annual basis) and even weak for the 30 companies sample the higher in liquidity at 12.9% (19.3% on annual basis), it scored 74.6% for the 17 companies (111.9% on annual basis). It scored about 1204.1% for the highest company, 704.2% for the second highest and 536.4% for the third highest. Despite their big rise, if calculated on annual basis, they remain lower than their turnover rates in 2014. Selected Companies % Total Market 95%
SelectedCompanies' Share of Total Market Capitalization Selected Companies % Total Market %
Select Companies' Share of Total Listed Companies Selected Companies 33.8% Total Market 66.2%
Select Companies' Share of Maket
2 2. The Monthly Report of the State,
Financial Administration Accounts – July 2015
The Ministry of Finance issued the monthly follow-up reports for the State’s Financial Administration Accounts for the period of April to July 2015, which is a good matter, and should be appreciated. Total collected revenues during that period amounted to approximately KD 6.0684 billion, about 49.7% of the total estimated revenues for the entire current fiscal year 2015/2016 in the amount of approximately KD 12.2106 billion, a noticeable decline by -40.2% below the total collected revenues during the same period of last fiscal year (2014/2015) in the amount of KD 10.146 billion.
In detail, the bulletin estimates actual oil revenues until 31/07/2015 by about KD 5.7046 billion, i.e. 53% of oil revenues estimated for the entire current fiscal year in the amount of KD 10.7575 billion, or about 94% of total collected revenues. The collected amounts from oil revenues during the first four months of the current fiscal year were less by KD -3.805 billion, -40%, than its counterpart value last fiscal year. KD 363.872 million was collected from non-oil revenues, a monthly average by KD 90.968 million. The total estimated amount for the entire fiscal year was about KD 1.453 billion. This means the realized amount will be less for the entire fiscal year by about KD 361.5 million than the estimated amount.
Expenditures allocations for the current fiscal year were estimated at about KD 19.171 billion, of which an amount of KD 3.165 billion was spent -according to the bulletin- until 31/07/2015, a monthly spending average at KD 791.258 million. We, however, do not recommend relying on this figure because there are expenses which have become due but have not been actually dispensed. Spending in the last month of the fiscal year will be higher when settlements are made and then in the final account. Although the bulletin concludes that the budget surplus in end of the first four months of the current fiscal year scored about KD 2.9034 billion, we publish it without recommending its endorsement as we believe that the surplus figure will change into deficit in the end of these four months and with the issuance of the final account.
In fact, the current fiscal year will witness a fundamental and negative difference with the budget deficit scoring about KD 4-5 billion, as we stated in a former report. 3. Oil, Sustainability and Stability
In a report issued last August, the U.S. Energy Information Administration (eia) adopts a scenario for the oil market conditions in the short term covering the remaining part of 2015 and 2016. The scenario expects the likelihood of the oil market remaining weak during this term with some slight negative influence of the American production level.
3 The Administration projects that the price of U.S. light oil would drop from an average of US$ 92.05 per barrel in 2014 to an average of US$ 48.82 per barrel in 2015, losing -47%, and expects that the U.S production level would reach its peak in the second quarter of the current year (an average of 9.58 million barrels per day) before it starts its gradual decline to settle at 9.36 million barrels per day until the end of the year. Despite its anticipation of a rise in oil price to an average of US$ 53.43 per barrel in 2016, the production average in the same year would fall to 8.96 million barrels per day especially when low prices start pressure on shale oil companies. What is important is not the drop volume but stopping production growth.
The importance of the USA to the oil market is derived from two factors. The first is that it became one of the biggest producers in the world, a factor which affects the supply side. The second is that it became due to the shale oil production technologies the determining factor for the higher cap of the oil price. Although the Administration also predicts that the U.S economic recovery with its GDP rising from 2.2% in 2015 to 3% in 2016 and perhaps more, the U.S is no longer an influencing factor on demand. The negative impact on demand will be realized by the sharp drop in China’s growth rates which lost about 3.5% of growth rates in pre-2008 levels in addition to its indirect impact on the growth of most countries of the world due to its superior commercial partnership with it, including
weak demand on all raw materials, most important of which is oil.
Under such circumstances, 5 of the GCC countries are anticipated to lose about -40.2% of their revenues achieved in 2014 and would score US$ 282 billion in 2015 (US$ 471.5 billion in 2014 and US$ 491 billion in 2013) according to Economic Intelligence Unit (EIU) for August 2015. The matter is not a big problem if the oil market weakness will continue for the short term or 2015/2016; but repeating weakness on the long run as in the 1980s and 1990s is closer to reality. Saudi Arabia has already issued bonds to finance deficit and its Minister of Finance urged cuts in unnecessary expenses. This is the case in Kuwait and others though it is a solution that buys sometime only.
The real criterion for countering the weak oil market in the medium to long terms is to adopt the sustainability principle. This means balancing the due expenses with only the recurrent revenues within a specific term. This will not be achieved without real surgery, i.e. a painful search
in waste and corruption sites, a
comprehensive change in the internal security concept and across borders, programmed replacement of the oil asset with a real economic activity that
guarantees creating a growing and
sustainable tax vessel. Indicators in the region so far which are moving towards a merited change are not encouraging. Therefore and unfortunately their stability is on the stake.
4 4. Burgan Bank Financial Results –
First Half 2015
The Burgan Bank announced its results for the first half of the current year, which indicate that the bank’s net profit, after tax deductions, scored KD 42.8 million with a rise by KD 6.2 million, or by 16.9%, compared with KD 36.6 million in the same period 2014. When we deduct the non-controlling interests and after interest payment on (Tier 1) capital securities, we note the bank achieved net profit to its shareholders by about KD 32 million versus KD 33.3 million for the same period of last year, scoring a decline by KD 1.3 million, 4.1%.
In details, the bank’s total operational incomes rose by KD 13.6 million, or by 10.4%, to KD 144.1 million (KD 130.5 million in the same period 2014), due to the rise in net gain from foreign currencies by KD 10.9 million, or by 452.6% , to KD 13.3 million (KD 2.4 million in the same period 2014). Likewise, item of net interests incomes increased by KD 7.2 million to KD 96.3 million (KD 89.1 million). While the item of net investment income dropped by 72.9%, or by KD 6.6 million, to KD 2.4 million (KD 9 million for the same period last year).
As for operations expenditures, total expenses (staff expenses and other expenses) rose by KD 6.2 million, or by 10.8% and scored KD 63.9 million (KD 57.7 million for the same period last year). Percentage of total operational expenses to total operational incomes scored 44.4% (44.2% in the first half of 2014). Total
provisions increased by KD 2.2 million, or by 8.1%, and scored KD 29.1 million (KD 26.9 million). The net profit margin increased to 27.7% (24.7% during the same period in 2014).
The bank’s financial statements show rise in the bank’s total assets by KD 227 million, or by 2.9% to KD 7.978 billion (KD 7.751 billion in the end of 2014). This rise would be bigger if they were compared with the total assets in the first half of 2014 and would be close to KD 492.6 million, or by 6.6%, when it scored KD 7.486 billion. Volume of loans and advances portfolio increased by 2.9% to KD 4.512 billion (56.5% of total assets) versus KD 4.386 billion (56.6% of total assets) in the end of 2014. If we compare the volume of this portfolio with its counterpart value in the same period 2014, we note it rose by 9.4% as it amounted to KD 4.123 billion (55.1% of total assets). Figures indicate that the bank’s liabilities (without including total equity) increased by KD 235.4 million, or by 3.5%, and scored KD 7.031 billion up from KD 6.796 billion in the end of 2014. This rise would be less if we compared the total liabilities with the same period 2014 and would be close to KD 225.9 million, or by 3.3%, as they scored KD 6.805 billion then. Percentage of total loans and advances to total deposits scored 66.4% (62.7% in the first half of 2014).
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Results of analyzing the bank’s
profitability indexes calculated on annual basis indicate decline in most of them compared with the same period of 2014. The average return on equities relevant to
the bank shareholders (ROE) after
deducted perpetual (Tier 1) capital security to 9.8% from 13.1%. Likewise, the return on average bank capital (ROC) decreased to 42.8% from 43.6%. While the return on
average assets (ROA) increased slightly to 1.1% from 1%. (EPS) decreased to 15.8 fils (18.7 fils in June 2014) due to decrease in the profit of the bank for the period attributable to equity holder of the bank after interest payment in (Tier 1) capital securities by 4.1%, as we mentioned above. (P/E) scored 13.4 times (13.6 times). (P/B) scored 0.9 times (1.3 times for the same period last year).
30/06/2015 30/06/2014 Change
(Thousand KD) (Thousand KD) Value %
Total Assets 7,978,393 7,485,769 492,624 6.6%
Total liabilities 7,030,943 6,805,056 225,887 3.3%
Equity Attributable to the equity holders of the bank after deducted perpetual Tier 1
capital security 647,377 538,526 108,851 20.2%
Total Operating Revenues 144,098 130,472 13,626 10.4%
Total Operating Expenses 63,937 57,720 6,217 10.8%
Provision 29,107 26,934 2,173 8.1%
Taxation 8,249 9,189 (940) -10.2%
Net income 42,805 36,629 6,176 16.9%
Ratios
**Return on Average Assets (ROA) 1.1% 1.0%
**Return on Average Equity Relevant To The Bank Shareholder after deducted
perpetual Tier 1 capital security (ROE) 9.8% 13.1%
**Return on Average Capital (ROC) 42.8% 43.6%
Earnings per share (EPS) – (Fils) 15.8 18.7 (2.9) -15.5%
Closing price – (Fils) 425 510 (85) -16.7%
*Price to Earnings Per Share Multiplies (P/E) 13.4 13.6
Price to Book Value Multiplies (P/B) 0.9 1.3
* Indicators Ended June 30, 2015 on an annual basis
** Calculated based on the average rate of the financial data at the end of December 2014 and June 2015
5. The Weekly Performance of Kuwait Stock Exchange
The performance of Kuwait Stock Exchange (KSE) for the last week was more active, where all indexes showed an increase, the traded value, the traded volume, the number of transactions, and the general index also showed an increase, AlShall Index (value weighted) closed at 380.8 points at the closing of last Thursday, showing an increase of about 3.4 points or about 0.9% compared with its level last week, while it decreased by 63.2 points or about 14.2% compared with the end of 2014.
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The following tables summarize last week’s performance of KSE
Description Week 36 Week 35 Diff
10/09/2015 03/09/2015 %
Working days 5 5
AlShall index (38 Companies) 380.8 377.4 0.9%
KSE index 5,764.9 5,758.0 0.1%
Value Trade (KD) 68,076,719 64,226,556
Daily average (KD) 13,615,344 12,845,311 6.0%
Volume Trade (Shares) 991,875,253 709,329,426
Daily average (Shares) 198,375,051 141,865,885 39.8%
Transactions 21,931 18,128
Daily average (Transactions) 4,386 3,626 21.0%
Most Active Sectors & Companies
% of Total Value Traded Description Market KD Sectors 12.1% 8,222,138
AL-DAR NATIONAL REAL ESTATE CO. K.S.C.C
8.4% 5,718,059
AL-MADINA FOR FINANCE AND INVESTMENT CO.
5.4% 3,682,294
MOBILE TELECOMMUNICATIONS COMPANY K.S.C
4.4% 2,991,869
NATIONAL BANK OF KUWAIT
4.3% 2,934,999
AGILITY PUBLIC WAREHOUSING COMPANY
34.6% 23,549,358 Total % of Total Value Traded Description Market KD Sectors 28.8% 19,592,173
FINANCIAL SERVICES SECTOR
22.5% 15,336,380
REAL ESTATE SECTOR
17.8% 12,121,286 BANKS SECTOR 12.6% 8,556,905 INDUSTRIALS SECTOR 8.2% 5,601,570 TELECOMMUNICATIONS SECTOR Week 35 Week 36 ALSHALL INDEX 03/09/2015 10/09/2015 8 12
Increased Value (# of Companies)
22 10
Decreased Value (# of Companies)
8 16
Unchanged Value (# of Companies)
38 38
Total Companies
Company Name THU THU DIFF CLOSE DIFF
10/09/2015 03/09/2015 % 2014 %
1 The National Bank Of Kuwait 395.9 395.9 0.0 435.9 (9.2)
2 The Gulf Bank 215.3 219.4 (1.9) 224.4 (4.1)
3 Commercial Bank Of Kuwait 442.6 450.6 (1.8) 506.9 (12.7)
4 Al-Ahli Bank Of Kuwait 206.2 212.8 (3.1) 268.4 (23.2)
5 Kuwait International Bank 239.7 239.7 0.0 258.4 (7.2)
6 Ahli United Bank 424.2 424.2 0.0 465.7 (8.9)
7 Burgan Bank 369.1 369.1 0.0 428.3 (13.8)
8 Kuwait Finance House 1118.7 1163.2 (3.8) 1,306.8 (14.4)
Banking Sector 413.1 417.7 (1.1) 464.5 (11.1)
9 Commercial Facilities Co 137.1 137.1 0.0 198.5 (30.9)
10 International Financial Advisors 312.1 312.1 0.0 332.3 (6.1)
11 National Investments 143.5 130.9 9.6 191.3 (25.0)
12 Kuwait Investment Projects 1337.1 1337.1 0.0 1,559.9 (14.3)
13 Coast Investment & Development 54.0 58.1 (7.1) 79.3 (31.9)
Investment Sector 374.0 372.5 0.4 455.4 (17.9)
14 Kuwait Insurance Company 69.5 63.9 8.8 64.0 8.6
15 Gulf Insurance Company 359.3 359.3 0.0 342.2 5.0
16 Al-Ahleia Insurance Company 150.2 140.8 6.7 185.9 (19.2)
17 Warba Insurance Company 86.9 86.9 0.0 95.0 (8.5)
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18 Kuwait Real Estate Company 100.1 98.5 1.6 116.5 (14.1)
19 United Realty Company 195.8 201.9 (3.0) 203.9 (4.0)
20 National Real Estate Company 176.9 174.7 1.3 274.6 (35.6)
21 Salhiah Real Estate Company 1292.1 1312.3 (1.5) 1,514.2 (14.7)
Real Estate Sector 174.8 176.1 (0.7) 216.7 (19.3)
22 The National Industries 132.2 132.2 0.0 169.8 (22.1)
23 Kuwait Cement Co 535.2 542.7 (1.4) 603.0 (11.2)
24 Refrigeration Industries Co 111.4 111.4 0.0 109.8 1.5
25 Gulf Cable & Electrical Industries 183.9 173.9 5.8 275.8 (33.3)
26 Contracting & Marine Services Co 69.7 64.8 7.6 72.1 (3.3)
Industrial Sector 178.9 177.9 0.6 219.7 (18.6)
27 Kuwait National Cinemas 665.4 665.4 0.0 615.2 8.2
28 Kuwait Hotels Company 97.9 97.9 0.0 97.9 0.0
29 The Public Warehousing Co 2328.5 2212.1 5.3 2,735.1 (14.9)
30 Mobile Telecommunications Co - ZAIN 447.5 385.0 16.2 915.7 (51.1)
31 Safat Energy Co 15.1 16.0 (5.6) 22.8 (33.8)
Services Sector 741.0 685.1 8.2 1,074.4 (31.0)
32 Livestock Transport & Trading Co 103.3 103.3 0.0 121.7 (15.1)
33 Danah Aalsafat Foodstuff Company 85.9 84.9 1.2 76.7 12.0
34 Kuwait United Poultry Co 65.3 65.3 0.0 60.0 8.8
35 Kuwait Food Co 2483.1 2207.2 12.5 2,759.0 (10.0)
Food Sector 843.6 756.0 11.6 932.7 (9.6)
36 Sharjah Cement Co 341.6 341.6 0.0 371.7 (8.1)
37 Gulf Cement Co 322.6 318.5 1.3 387.1 (16.7)
38 Umm Al-Qaiwain Cement Industries 596.0 610.7 (2.4) 750.5 (20.6)
Non Kuwaiti Companies 226.2 226.3 (0.0) 249.2 (9.2)
