Oil prices still firm end of Nov
KSE performance less active m-o-m
By the end of November 2013, the 8th month of the current fiscal year 2013/2014 ended and oil prices are still firm. Kuwaiti oil prices revived their upward rise above the $100 per barrel level for the fifth consecutive month. The average price for the Kuwaiti crude for November, most of it, scored about $103.4 per barrel, down by about $-2 per barrel below October average price at $105.3 a barrel. Therefore, the average price of the Kuwaiti barrel of oil in the first eight months of the current fiscal year scored $103.2 a barrel, an increase by about $33.2 a barrel, or 47.4% above the new hypothetical price estimated in the current budget at $70 per barrel. It is however lower by some $-2.7 a barrel, -2.5%, than the average Kuwaiti crude price at $105.9 a barrel for the first eight months of the past fiscal year 2012/2013 which ended by the end of March 2013. The average Kuwaiti oil price for the last financial year 2012/2013 scored $106.5.
Kuwait is supposed to have achieved oil revenues in the first eight months of the year in the amount of KD 20.6 billion.
Assuming production and prices would continue at their present levels - an assumption which is irrelevant on the part of price and perhaps production- it is expected that the value of potential oil revenues for the entire current fiscal year would score about KD 31 billion, which is higher by about KD 14.1 billion than budget estimates. Adding some KD 1.2 billion in non-oil revenues, the total budget revenues for the current fiscal year would score about KD 32.2 billion. Comparing this figure with the expenditures obligations of about KD 21 billion, the result will be a hypothetical budget surplus for the fiscal year 2013/2014 by about KD 11-12 billion, as a whole. In fact it might be higher when we calculate the saving in the budget expenditures over the estimated in the current year 2013/2014 budget.
The Central Statistical Bureau published a report entitled “Revised and Provisional Estimates of National Accounts (at constant prices) during the years from 2010 to 2012”. The report contains important data about the performance of Kuwait’s economy, which we will analyze here, together with comments to improve the report in the future.
The most important piece of information in the report is perhaps that Kuwait’s GDP in constant prices, i.e. the size of the economy after removing inflation effects, grew by 8.3% in 2012. This means that Kuwait’s economy witnessed good growth in 2012 and higher than the IMF forecast of 6.2%. We noticed a change from the preliminary estimates for real growth in 2011, which went up to 10.2% from 6.3%, which is quite significant and positive. Historically, the real growth rates for 2011 and 2012 were the highest since 2005, an indication of the sustained recovery of Kuwait’s macro-economy from the impacts of the global economic crisis that began in 2008 and caused a real contraction in Kuwait’s economy for two consecutive years by -7.4% in 2009 and -2.4% in 2010.
Per capita share of GDP in constant terms in 2012 grew by 2.9%, which is positive, though it is less than the 8.7% growth rate in 2011. It is worth noting that the per capita measure includes both Kuwaitis and non-Kuwaitis, two groups with large variations in income and productivity levels. As such, “per capita” measures might be confusing in a country where expatriates constitute about 68.5% of the population.
We draw the attention to the fact that the high real growth of Kuwait’s economy is still dependent in the first place on growth in the oil sector, which grew in 2012 in current prices by 19.3% and by 11.9% in constant prices. This is compared with 2011 growth rates that were 44.1% in current prices and 15% in constant prices. Non-oil sectors grew by 9.9% in current prices and by 4% in constant prices in 2012 vis-a-vis 8.2% and 3.3%, respectively, in 2011. This means that non-oil sectors increased their real growth rates in 2012 compared with a drop in real growth for the oil sector in the same year. However, the oil sector still grows at much higher rates than the non-oil sectors. That is why the share of the oil sector in the GDP in constant terms increased from 56.3% (60.9% in current terms) in 2011 to 57.9% (62.8% in current terms) in 2012, indicating an increased reliance of Kuwait’s economy on oil.
We have some remarks about the above report, noting that there are commendable efforts to improve it. We believe it should be issued earlier so as not to be outdated and thus of little use. The data should be also published periodically and not just annually. In addition it is important to reduce the gap as much as possible between preliminary estimates in a certain report and the final estimates in the next one, with explicit reference to the size and reasons for the adjustments. Such unannounced changes have occurred in the 2011 real GDP growth data in the current report, as well as in the same category of data for the years 2006-2010 in the previous report of December 2012. These measures are an indicator of the accuracy of the economic models used in estimating the data, as well as assuring the credibility of official data.
KSE performance during November 2013 was less active compared with that of October. Indexes of value, volume of trade and number of transactions, including value of the general index, declined. Al-Shall index reading in the closing of Thursday, 28/11/2013 scored 461.2 points down by -6.1 points, -1.3% compared to October 2013, when the index scored 467.2 points, and a rise by 23 points, 5.2%, compared with the closing level of 2012. The highest reading for the index during November scored 468.2 points on 07/11/2013 and the lowest reading scored 457.9 points on 26/11/2013.
After the period of announcing the financial results of the third quarter of 2013, which were positive in general, during which some companies that used to achieve accumulated losses in the former years managed to achieve profits during this year. The price index of the stock exchange scored 7,785.5 points in the end of November 2013 (5,934.3 points in the end of 2012), which is up by 31.2%. KSE weighted index reached about 459 points at the end of November 2013 compared with 417.7 points at the end of last year, an increase of about 9.9%. Kuwait 15 index scored 1,083.3 points in the end of November vis-a-vis 1,009.6 points in the end of 2012, a rise by 7.3%. This resulted from the demand that prevailed during most of the sessions of the month, which included many of the listed stocks, specially the small stocks which were influenced by continued speculation that dominated its transac- tions.
Value of traded shares during November 2013 (18 work days due to the new Islamic Year and the ArabAfrican Summit) scored KD 531.1 million, a decline by KD -94.2 million, - 15.1% (KD 625.4 million in October). The highest trading value in one day scored KD 55 million on 21/11/2013 and the lowest scored KD 20.2 million on 12/11/2013. The daily average value of traded shares during the month scored KD 29.5 million (KD 34.7 million in October). Total volume of traded shares scored 4,975.1 million shares, down by -30% (7,108.9 million shares in October 2013). The daily average approximated 276.4 million shares, down by 118.5 million. Total number of transactions scored 120,100 , a daily average of 6671 deals, a drop by -20.9% vis-a-vis October.
When we measure the stock exchange performance during the past 11 months of the current year (223 work days), we find value of traded shares scored about KD 1,0665.6 million ($37,533.5 million) vis-a-vis KD 6,493.5 million for the same period of 2012, a rise by KD 4,172.1 million, 64.3%. The daily average value of traded shares during the period scored KD 47.8 million versus KD 28.5 million, a rise by 67.9%, for the same period in 2012.
Market value of all listed companies (196 companies) scored about KD 3,1307.2 million. Comparing the market value between October and November of 2013, we find a drop in the market value by KD -599.5 million, -1.9%. But if we compare the market value between 30/11/2013 and the end of 2012 for 195 listed companies, we find it rose by KD 2,308.5 million, from KD 2,8638.7 billion in the end of 2012 to about KD 3,0947.2 billion in the end of November 2013, arise by about 8.1%. It is worth pointing that the number of gainers, compared with the end of the last trading day of 2012, was 145 companies out of 195 common companies in the market. 45 companies were losers and the value of 5 companies did not change. After excluding the companies which increased or decreased their capitals, Bayan Investment Company scored the highest rise in value, an increase by 265.2% and then Dubai First for Real Estate Development came second with a rise by 255.6%. On the other hand, Remal Al Kuwait Real Estate Company sustained the highest lost in its value by a drop of -62.6% and Kuwait Hotels Company came next with a loss of -36.3%.
As for sectors, 11 out of 12 achieved gains. The consumer goods sector rose the highest at 39.5%. The financial services sector scored the second highest rise by 26.8%. The telecommunications sector scored the only and biggest drop by about -15.3%.
The graph shows the distribution of the market value as per sectors as of the end of November 2013.
Ahli United Bank announced its results for the first 9 months of the current year 2013, which indicated the bank’s net profits, after deductions of KFAS, national labor tax, and Zakat, scored about KD 35.7 million, up by KD 7.1 million, or 24.7%, (KD 28.7 million in Sept 30, 2012). The rise in profits is due to the rise in operational incomes by KD 9.8 million which scored KD 73.6 million (KD 63.8 million for the same period in 2012).
In details, operational incomes scored KD 73.6 million (KD 63.8 million for the same period in 2012) meaning that the revenues rose by KD 9.8 million as a result of the bank achieving KD 2.4 million profits from net gain on sale of investments property item during the past part of 2013 until the end of September 2013, and the rise in the item of net fees and commissions income by KD 1.2 million to KD 8.1 million (KD 6.9 million in the third quarter of 2012), and the rise in foreign exchange gains by KD 290,000 to KD 3.2 million (KD 2.9 million in the same period in 2012). The net financing income during the first 9 months on Sept 30, 2013 rose by KD 5.1 million (9.6%) to KD 58 million (KD 52.9 million in the same period of 2012) due to the drop in financing revenues by KD 1.9 million to KD 72.2 million (KD 74 million in the same period in 2012). The drop is less than the drop in the item of distributions to depositors by KD -6.9 million, or -32.7%, to KD 14.2 million (KD 21.1 million in the same period in 2012). This led to rise net margin of financing incomes from 71.5% in the end of September 2012 to 80.3% now.
On the other hand, operational expenditures rose by KD 1.4 million to KD 22.6 million (KD 21.3 million in Sept 30, 2012) because item of staff costs increased by KD 1.1 million to KD 13.5 million (KD 12.4 million in the third quarter 2012), and other operating expenses increased by KD 613,000 to KD 6.82 million (KD 6.21 million in the same period in 2012). Total provisions rose by KD 1 million, or 8.1%, and scored KD 13.6 million (KD 12.6 million in the same period in 2012). Therefore, the net profit margin rose to 40.7% (33.8% in September in 2012).
When we analyze the balance sheet of the bank, we note that total assets scored about KD 3079.6 million, up by 17% in compassion to KD 2,632.9 million at the end of 2012, and rose by 19.6% when compared with the total assets in the third quarter of 2012 in the amount of KD 2,574.4 million. Item of financing receivable rose by KD 345.5 million, or 20%, to KD 2,073.6 million (67.3% of total assets) versus KD 1,728.1 million (65.6% of total assets) in the end of December 2012. However, the item rose by KD 347.5 million, or 20.1%, when compared with the same period of 2012 when it scored KD 1,726 million (67% of total assets). The bank’s deposits at the Central Bank of Kuwait dropped by 6.8%, or equivalent to KD 22.6 million reaching KD 310 million (10.1% of total assets) vis-a-vis KD 332.6 million, (12.6% of total assets), in the end of 2012, but dropped by KD 41.5 million, or 11.8%, and scored KD 351.5 million (13.7% of total assets) when compared to their value in the same period of 2012. Item of cash and balances with banks rose by KD 127 million and scored KD 394.1 million (12.8% of total assets), a rise by 47.5%, vis-a-vis KD 267.2 million (10.1% of total assets), in the end of 2012. When compared with its amount in the same period last year, KD 273.3 million, (10.6% of total assets), we note a rise by KD 120.8 million, a rise by 44.2%.
Results of analyzing the bank’s financial statements indicate improvement in all the bank’s profitability ratios. The return on average equities ratio for the bank shareholders (ROE) rose to 16.1% from about 14.4% in the same period last year. Return on average assets ratio (ROA) also went up to 1.7% (1.5% in third quarter 2012). Return on average capital ratio (ROC) also went up to 38.4% (33.1% in the same period 2012). EPS increased to 30 fils (24.7 fils in the same period 2012). Price multiplier to the earning per share (P/E) scored 17.8 times (27.3 times in the same period 2012) as a result of the rise in the EPS by 21.5% from its level in Sept 30, 2012 and its comparison with the drop in the market price of the share by 21.1%. Price multiplier to book value per share (P/B) scored 2.9 times from about 3.7 times in the same period 2012.
The performance of Kuwait Stock Exchange (KSE) for the last week was mixed where the indices of the trade value and volume showed a decrease while the number of transaction and the general index showed an increase. AlShall Index (value weighted) closed at 461.2 points at the closing of last Thursday, showing an increase of about 3.2 points or about 0.7% comparing to last week and an increase of 23 points or about 5.2% compared with the end of 2012.
The following tables summarize last week’s performance of KSE
Value Trade (KD)
Volume Trade (Shares)
Transactions Real Estate Sector Financial Services Sector Banks Sector Industrials Sector Consumer Services Sector
1,273,950,544
31,006
Most Active Sectors & Companies Kuwait Finance House International Financial Advisors Abyaar Real Estate Development KSCC Kuwait Real Estate Company Gulf Finance House E.C.
30/09/2013 (Thousand KD)
30/09/2012 (Thousand KD) 13,706,185 6,749,486 6,223,713 6,080,334 4,624,377
Change Value
1,171,126,415
23,972
%