Mature bourse remains ahead

12 August 2005
The Kuwaiti market outperformed its regional peers in June and July, as the bourses of Qatar, Saudi Arabia and the UAE underwent corrections. The rise has been driven by strong first-half corporate profits, with some companies reporting rises of more than 100 per cent. Modest valuations - by regional standards - and expansionist local blue chips suggest that the bulls have some distance to run.

The benchmark Kuwait Stock Exchange (KSE) index climbed by 9 per cent in June and 4 per cent in July, to enter August showing a year-to-date surge of more than 40 per cent. 'The reasons for the market doing so well are clear,' says Shailesh Dash, head of research at the local Global Investment House. 'Valuations are reasonable, with an overall PE [price/earnings] ratio of about 13, and the cumulative profits of the 76 local companies which have so far reported their first-half results are up by some 75 per cent.' Although corporates across the sectors are posting spiralling profits, there is wide divergence. The investment sector is the star, with total net income of reporting companies up by 102 per cent year on year, feeding off the booming stock market.

The banking sector is one of the market's drivers, with National Bank of Kuwait (NBK) dominating. Investors have reacted positively not only to the bank's profits but also to news that NBK is to establish its own investment subsidiary and is arranging the private placement of shares in newly established Capital City Real Estate Company, to be launched by the local Sahlia Real Estate Company.

Global has been tipping MTC stock for some time and continues to do so. 'MTC shares have been going up every day since we published our most recent report [in late June],' says Dash. The recent acquisition of Amsterdam-based operator Celtel, as well as proposed internal restructuring, kick-started the share price rise, and there are also market rumours of an impending rights issue to pay down some of the $2,400 million debt used to fund the Celtel purchase.

PWC Logistics is another popular stock, accounting for the second highest turnover value in July. However, its stock has been volatile recently, as investors digest news of the company's acquisitions and contract awards. There were also conflicting reports about the status of PWC's $1,500 million subsistence prime vendor contract to supply food to the US military in Iraq, Jordan and Kuwait, which, the company said in late July, is back on. 'It takes time for acquisitions to bed down and for investors to see that they are a good fit,' says Dash. 'But the firm is well managed and the outlook is good over both the medium and long term.'

The deepening of the region's most mature bourse also continues, with three new listings in July - of Al-Dar National Real Estate Company, Al-Themar Real Estate Company and National Ranges Company. Four new stocks were listed in June.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications