Kuwait: Kuwait Financial Centre “Markaz” released its Monthly Market Review report for the month of August 2023. Kuwait’s All Share Index witnessed a decline in August, posting a monthly fall of 3.4%. Among Boursa Kuwait’s sectoral indices, Healthcare gained the most at 6.3%, while Consumer discretionary lost 7.0% for the month. Banking sector stocks were weak with the exception of Commercial Bank of Kuwait (CBK), whose share price surged during the month to touch its 52-week high and registered a 12.8% gain for the month of August. The upward movement of CBK’s share price was triggered by positive earnings results for Q2 2023, where the bank’s profit surged by 103% y/y in Q2 2023 due to a net reversal of provisions nearly KD 16.2 million. Among Premier Market stocks, Kuwait Real Estate Company and Arzan Financial Group for Financing and Investment gained the most for the month, rising by 14.9% and 12.7% respectively. Jazeera Airways and HumanSoft Holding fell by 16.5% and 10.4% respectively during the month.

Kuwait's parliament approved the draft budget for the year 2023-24, which forecasts a fiscal deficit of KD 6.8 billion (USD 22.13 billion). The budget is based on an assumed average oil price of USD 70/bbl. The IMF, in its Article IV review, commended Kuwait’s stable economic recovery post-pandemic and strengthening fiscal buffers but emphasized the need for fiscal and structural reforms to diversify the economy given the cloudy economic outlook owing to oil price volatility. Kuwait’s CPI inflation stood at 3.8% y/y in July, remaining unchanged on m/m basis. Credit to residents grew at 3.3% y/y in July, albeit slowing to 0.6% on a year-to-date basis in July compared to 0.8% in June.

Regionally, GCC Markets were mixed during the month. The S&P GCC composite index fell by 3.2% for the month. Apart from Kuwait, Qatar and Saudi equity indices fell the most at 7.0% and 1.7% respectively during the month. Dubai and Abu Dhabi equity indices gained by 0.6% and 0.2% respectively. Dubai’s resilience was driven by the rebound in real estate prices and tourism activity. Dubai's main airport reported a 49% surge in passenger traffic in the first half of the year to 41.6 million, surpassing pre-pandemic levels. Dubai’s real estate stocks continued to rally due to the positive outlook of Dubai’s real estate sector. Qatar and Saudi indices were at lower levels as several stocks were trading ex-dividend post the earnings announcement. Shares of Saudi Aramco increased by 7.7% in August, as investors were buoyed by the company’s indication that there would be further investments into China worth between USD 45-55 billion in 2023. The investment proposed by Aramco is roughly double the capital expenditure planned by Europe’s biggest oil company Shell. Q Holding, the Abu Dhabi based real estate company, witnessed a 49% surge in share price for July as ADQ and IHC Capital have proposed merger with Q Holding to

create USD 12 billion entity. Etisalat stock fell 11.4% for the month, driven by the Q2 2023 results of Vodafone group, which fell below investor expectations. Etisalat is the largest shareholder of the Vodafone group.

According to the Federal Center for Competitiveness and Statistics, UAE’s real GDP grew at 3.8% y/y in Q1 2023, with the transportation sector exhibiting the fastest growth at 10.3% y/y. Dubai's inflation eased to 1.02% y/y in July, its lowest reading since November 2021, down from 2.05% y/y recorded in June. Saudi Arabia’s real GDP growth slowed down to 1.1% y/y in Q2 2023, compared to 3.8% y/y in Q1 2023 and 11.2% in Q2 2022, according to the General Authority for Statistics. The slowdown in real GDP growth could be attributed to the oil production cuts during the year. Saudi’s CPI eased to 2.3% y/y in July, down from 2.7% y/y in June. Saudi Arabia recorded a budget deficit of SAR 5.3 billion (USD 1.41 billion) in Q2 2023.

Developed markets’ performance was negative in August with the MSCI World index and S&P 500 indices falling 2.6% and 1.8% respectively. Global markets trended downwards as the hawkish stance by the U.S Fed and the sluggish recovery in Chinese demand weighed on investor sentiment. The minutes of the Jackson Hole Symposium held between August 24-26th stated that inflation is still a major concern for developed economies, indicating the central banks might retain their hawkish stance in rising interest rates. Fitch Ratings has downgraded the U.S sovereign credit grade from AAA to AA+ owing to expanding fiscal deficits and erosion of governance that have caused recurrent debt limit emergencies over the past two decades. U.S. financials sector stocks declined for the month after S&P Global downgraded the credit ratings of five regional banks and highlighted the stress in the commercial real estate lending market. U.S CPI stood at 3.2% y/y in July, driven by higher housing, car insurance and food costs. Inflation in July edged up mildly from 3% y/y in June, which was the lowest rate in more than two years. Japan’s TOPIX index was flat for the month despite weakness in global markets as Japan’s GDP growth numbers in Q2 2023 exceeded consensus forecasts by economists. The MSCI Emerging market index fell 6.4% for the month weighed down by the slower than expected growth in the Chinese economy. The Chinese stock index declined by 5.2% during the month due to decline in real estate stocks and the easing of monetary policy. China’s Central Bank lowered its one-year loan prime rate to 3.45% from 3.55%. China’s economy witnessed deflation as consumer prices declined 0.3% y/y in July, its first deflation reading since early 2021.

Oil price settled at USD 86.9 per barrel, recording a monthly gain of 1.5%. Oil prices gained despite concerns over weak demand from China owing to lower-than-expected U.S crude oil supplies and voluntary oil supply cuts from Saudi Arabia and Russia. Fears of reduced oil supply from Russia driven by the potential for conflict between Russia and Ukraine in the Black Sea region supported oil prices. Saudi Arabia plans to extend its voluntary production cut of 1 million bpd for another month into September. Russia announced that it would cut oil exports by an additional 300,000 bpd in September. OPEC+ forecasts a rise of 2.44 million bpd in demand during 2023. Gold prices declined 1.2% in August to 1,939.7 $/oz due to the hawkish stance of the U.S Fed.

Global equity markets remain concerned over the Fed’s hawkish stance and the sluggish economic recovery in China as they move into September. Oil prices are expected to remain volatile as China’s slowdown is expected to affect global oil demand. However, extension of oil voluntary production cuts from Saudi Arabia and Russia is anticipated to support oil prices. Further economic data releases from the U.S. and China will be keenly watched in the upcoming month and could be the key driver for global and GCC markets in September.

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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 KD 1.17 billion as of 30 June 2023 (USD 3.82 billion). Markaz was listed on the Boursa Kuwait in 1997. Over the years, Markaz has pioneered innovation by developing new concepts resulting in new investment channels that enjoy unique characteristics enabling Markaz to 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 and only options market maker in the GCC since 2005), all conceptualized, established, and managed by Markaz.

For further information, please contact:
Sondos S. Saad
Media & Communications Department
Kuwait Financial Centre K.P.S.C. “Markaz”
Email: ssaad@markaz.com