GCC market cap up 1.9% to Dh3.78 trillion

Both acquisitions are interesting as they diversify NMC's revenues. (File)

The combined market capitalization of GCC bourses rose 1.9 per cent month-on-month (MoM) to $1.03 trillion (Dh3.78 trillion) in January 2015 despite drop in equities in line with oil price, Global Investment House said in a report.

The market capitalization of all indices, except Abu Dhabi and Qatar, ended higher for the month.

At $510.2bn, Saudi Arabia was the largest contributor (49.5 per cent), followed by Abu Dhabi and Dubai ($198.7bn or 19.3 per cent), and Qatar ($177.9bn or 17.3 per cent). Kuwait, Oman, and Bahrain together contributed $143.3bn.

The Kuwaiti investment bank said GCC markets ended mixed in January 2015.

The TASI gained the most (up 6.5 per cent MoM) as a sharp increase in oil prices at the end of the month boosted sentiment, followed by MSM30 (3.4 per cent MoM) and KSE (0.6 per cent MoM).

Other GCC markets ended in the red due to prolonged concerns over a dip in oil prices. The US Energy Information Administration’s report showed that crude stockpiles in the US surged to an 80-year high during the month, which dented sentiment. However, positive earnings offset the fall. QE was the biggest loser (-3.1 per cent MoM), followed by DFM (-2.6 per cent MoM), ADX (-1.6 per cent MoM), and BSE (-0.2 per cent MoM).

Trading in GCC markets declined in January 2015. Volume traded dropped 29 per cent MoM, with all markets recording a fall. Value traded plunged 27.1 per cent MoM due to a decline in value traded in all bourses. Bahrain, Oman, Qatar and the UAE were the major losers. Saudi Arabia was the biggest contributor ($41.7bn) to the total trading value ($51bn).

Long-term growth to remain intact

GCC markets ended mixed in January as weak sentiment due to falling oil prices was offset by positive earnings and value buying across sectors.

Among sectoral indices, Banks remained the key gainer, largely due to positive earnings.

Recently, Kuwait’s government projected a deficit in its 2015 budget, indicating that a decline in oil prices would impact the GCC countries in the short term.

GCC produces about 20 per cent of total global oil output and accounts for nearly 35 per cent of global oil exports.

However, Saudi Arabia’s government reiterated that it would continue to spend into non-oil sectors to diversify its economy away from oil. This was reflected in its 2015 budget and reaffirmed on January 30, 2015, when the new King Salman ordered two months of salary bonus to all public sector employees among several other expenditure as well as reorganization in top government positions.

In terms of valuation, the price earning (PE) ratio of GCC markets is at 9.8-18.2x, lower than its key emerging markets peers.

Long-term valuations of GCC markets remained intact, following the inclusion of the three largest GCC markets – the UAE and Qatar in May 2014 and Saudi Arabia expected in H1 2017 – on the MSCI Emerging Markets Index.

Qatar is expected to attract significant infrastructural investments as Fifa President Sepp Blatter reaffirmed that the World Cup 2022 would be held in the country. The UAE markets would record strong growth with the hosting of Dubai Expo 2020. Kuwait, Bahrain and Oman would follow their larger peers, with gradual improvement in non-oil revenues.

UAE – Abu Dhabi

Abu Dhabi’s ADX declined 1.6 per cent MoM in January, following a 3.1 per cent MoM fall in December. The decline in Real Estate and Banks was partly offset by strong performance from Investment & Financial Services stocks.

The index started the month by posting declines due to falling oil prices, but soon recovered in the second week. In the last week of January, the market was impacted by volatility in global markets. In terms of corporate performance, Islamic banks reported strong growth in earnings and improved asset quality.

Tasweek, the Abu Dhabi based property investor, delayed the launch of its IPO due to volatile markets and expects to execute it in Q1 2015.

However, the company has still not decided whether to list in Dubai or Abu Dhabi. The planned IPO of Massar Solutions is likely to be delayed due to weak market conditions amidst volatility in regional capital markets and subdued oil prices.

Trading on the ADX fell in January. Total trading volume fell 66 per cent MoM to 1.8bn shares from 5.1bn shares in December and the total value traded declined 54.6 per cent MoM to $1.1bn.

At the end of January, market capitalization of the companies listed on the ADX fell 2 per cent MoM to $111.4bn. Total market capitalization of the top 10 listed companies fell 2.4 per cent MoM.

UAE – Dubai

The Dubai Financial Market (DFM) index fell 2.6% MoM in January, compared to an 11.9% MoM decline in December. The decline was largely ascribed to a fall in the Real Estate & Construction and Investment & Financial Services sectors, partly offset by gains in the Transportation sector.

The index started the month on a weak note due to global cues and subdued oil prices. However, it recovered sharply, with the index being the top global performer on January 7. This was ascribed to a slowing of the crude oil price decline.

Towards the end of the month, an announcement by the Dubai Courts of an expanded list of more than 150 cancelled developments in the Emirate weighed on the Real Estate & Construction stocks. This contributed to the overall correction in the market. However, strong corporate earnings enhanced investors’ confidence, limiting the downside.

Trading on the DFM declined in January, with volume down 30.4 per cent MoM to 8.2bn shares. The value traded fell 38 per cent MoM to $3.8bn.

At the end of January, the market capitalization of companies listed on the DFM rose 2 per cent MoM to $87.3bn. The total market capitalization of the top 10 listed companies fell 0.4 per cent MoM.

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