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Corporate results, high oil prices push Kuwait share market up

The increase in demand and events such as an explosion at a BP refinery in Texas and the accident on the offshore platform at the Mumbai have fuelled concerns about energy supplies leading to increase in the oil prices. The benchmark "Global" general index was up by 4.08 per cent to end the month at 262.5 points.

The index has reported YTD gain of 36.97 per cent at the end of July-2005. As a result of these improved prices, the market cap. of the stock exchange reached KD32.46 billion, a growth of 4.5 per cent compared to last month. The Kuwait Stock Exchange price index , which reached its highest level ever during the month, closed the month at 8973.1 points, an increase of 1.8 per cent.

The corporates recorded a healthy profit increase of 74 per cent in 1H05 (87 companies whose profitability was available till the 31st July, 2005) as compared to the corresponding period of the previous year. Investment and Real estate sectors have been among the noteworthy sectors that have produced exceptional results, an increase of 102.8 per cent and 52.5 per cent respectively. Despite the good first half 2005 profits by the real estate sector, the value of the sector index dropped by 1.17 per cent on a m-o-m basis compared to the previous month. Out of the 24 companies listed in the real estate sector, 15 companies came out with 1H05 results, where as 9 companies are yet to disclose their earnings. We believe that the sector is likely to witness increased trading activity.

The strong first half results by the corporates helped to increase the business and investors sentiments. This was also complemented on the macro front, where Kuwait parliament committee finalised a long-awaited draft law for a multi-billion-dollar upgrade of northern oilfields. This would involve the help of international oil companies. According to the reports, the Ministry of Commerce and Economy also granted 26 new companies with the total capital KD79 million where 22 are companies and remaining 4 are holding companies, which indicates the boost for private companies and improving business sentiments. These developments show the willingness of the government to attract foreign/private investment to boost the overall economic health of the country.

The global service sector index was the star performer for the month to end the month at 1318.55 points, an increase of 9.89 per cent. Public Warehousing Company (PWC) hogged the limelight with the acquisition of GeoLogistics, an international freight provider and logistics services for approximately $454 million on a debt free basis. The company also formed a joint venture with Dnata to offer air cargo services between airports in the gulf region. Despite the acquisition and joint venture, PWC prices initially witnessed selling pressure due to the suspension of the deal with the US pentagon worth $1.5 billion.

Banking sector was in the limelight during the month on back of good results posted by all the eight banks listed on the market. The CBK also raised its rates to 5.5 per cent during the month of July, which will help the banks to increase their interest income, and in turn increase the overall performance. Kuwait Real estate bank (KREB), was the leader in price gainers, reporting a monthly gain of 12.5 per cent. According to the reports, KREB has finished several measures required for converting itself into an Islamic bank and is awaiting final approval from CBK to start operations.

The Kuwaiti market breadth was marginally negative with 69 stocks declining in the month and 60 stocks advancing, while 18 stocks remained unchanged. The top gainers during the month were United Gulf Bank (+27.8 per cent), followed by KIPCO (+25.9 per cent) and International Investment Group (+25 per cent). KIPCO witnessed strong investor interest last month where the price increased from 290fils in June to reach 365fils in this month. In addition, KIPCO has submitted formal bid to the Algerian Government for purchasing parts of Algeria's El Aurassi Hotel and is awaiting a response. KIPCO recorded the highest volume with about 309 million shares exchanging hands. It was also the leader in terms of value of shares traded, with the total value of KD102 million.

Out of the 60 advancers during the month, 21 stocks have seen double-digit growth indicating strong investors interest. On the other side, the major decliners were Shuaa Capital (-27.4 per cent) and Humansoft Holding Company (-16.0 per cent). Al Aman Investments (previously known as Al Shall Consultants and Investment) stock price readjusted, as it started trading ex-rights and ended the month at 250fils. The overall index gain did not translate into increased activity during the month, with both the volumes and value traded retreating. The market traded 3.22 billion shares, down 24.7 per cent from the previous month. Investment sector that dominated the market, accounted for 44.4 per cent of the total volume traded during the market. On the other hand, the value of shares traded also shrunk by 27.8 per cent to KD1.78 billion.

The market added three new companies during the month, improving the depth of the market and providing investors with more flexibility. One service company (National ranges Company) and two real estate companies (Al Dar National Real estate and Al Themar Real Estate Company) which increased the total number of listed companies stocks to 147, so far 22 new companies have been added to the market in 2005.