GCC market cap shrinks in 2015
Trader are seen at the Kuwait Stock Exchange. GCC governments have expressed their commitment to support growth in the non-oil sector by sticking to their current development spending plans and maintaining large deficits in the medium term and could put pressure on liquidity.
Dubai - Capitalisation drops 11.4% to $856.3b in 2015 from $954.2b in 2014
GCC markets' capitalisation shrank $97.8 billion in 2015 as equities underperformed most international peers with the MSCI GCC total return index retreating 15 per cent during the year, its weakest performance since 2008, a report said.
An economic update from the National Bank of Kuwait, or NBK, said GCC market capitalisation shrank last year as market correction followed three years of solid performance. While regional markets fared worse than their international counterparts, equities in general were thrashed in 2015.
But a report by Global Investment House said the combined GCC market capitalisation dropped 11.4 per cent year on year to $856.3 billion in 2015 from $954.2 billion in 2014.
The Saudi bourse, which registered a 7.1 per cent fall in market capitalisation, was the biggest contributor to the overall market capitalisation ($20.8 billion or 49.1 per cent), followed by the Qatari bourse, the Abu Dhabi and Dubai bourses.
Trading across GCC markets declined in 2015, Global Investment House said. The volume and value of shares traded fell 33.5 per cent and 31.5 per cent, respectively, owing to a fall in trading activities across members due to weaker sentiments over the fall in oil prices during the year. NBK report said regionally, lower oil prices remained the main driver of markets.
"Oil prices and GCC equities have moved largely in tandem since oil prices started retreating in the second half of 2014. The relationship has been far from symmetrical, with correlations increasing notably whenever oil prices took a dive."
"With the exception of the large petrochemical sector in the Saudi stock market, GCC equities have little direct exposure to oil prices, though or course oil dependence pervades the GCC economies," said NBK.
"Furthermore, low oil prices do raise concerns about fiscal sustainability and growth in regional economies. While GCC governments have expressed their commitment to support growth in the non-oil sector by sticking to their current development spending plans and maintaining large deficits in the medium term, a prolonged period of low oil prices could force governments to reduce capital spending and benefits, and could put pressure on liquidity," the bank said.
The issuance by the Saudi government of $28 billion in bonds in 2015 to finance the fiscal deficit served as a reminder of these concerns, the NBK update said.
"Markets in the region continued to be pressured by a number of domestic and market specific factors. In the UAE, worries about an imminent correction in property markets continued to make headlines. In Qatar, the possible threats to the 2022 World Cup remained a concern, albeit a remote risk," NBK said.
In Kuwait, with stock market liquidity remaining below historic averages and equities trading well below book value, several companies listed on the Kuwait Stock Exchange requested to delist, though the companies in question were all relatively small and had little impact on market capitalisation.
"The GCC saw some positive events take places, but these were largely overshadowed by market volatility," the bank said in it markets update.
"Dubai, with a larger foreign investor base, is typically more exposed to international factors (including oil prices). Qatar, Oman and Bahrain were each down 15 per cent in 2015. Kuwait's value-weighted index was down 13 per cent on the year and Abu Dhabi outperformed the region with a smaller decline of five per cent," the NBK report said.