During August, Kuwait's stock market continued its positive performance on the back of economic growth and an undercurrent of strong liquidity owing to high oil prices. Oil prices jumped to new highs and touched US$70 per barrel as “Hurricane Katrina” forced reduction in the oil production and refining operations in and around Gulf of Mexico.
The benchmark “Global” general index was up by 3.85% to end the month at 271.80 points. The index has reported YTD gain of 42.23% at the end of August-2005. The market cap. of the stock exchange reached KD34.11bn, a growth of 5.08% compared to last month. The Kuwait Stock Exchange price index, which reached its highest level ever during the month, closed the month at 9642.3 points, recording an increase of 7.46% over the previous month.
With the trading value for the first eight months already exceeding the total value of shares traded for the full year of 2004, market analysts believe that the index might breach the psychological barrier of 10,000 point mark on the back of strong buying interest.
Strong profit growths helped boost the investment sector to the forefront of gainers during the month, as the “Global” investment sector Index climbed 11.98% in August ‘05. The profits of investment sector companies during the 1H-2005 more than doubled compared to the corresponding period last year, reporting an increase of 108.49%. International Investment Group (IIG) hogged the limelight as it was among the leaders in terms of volume and value of shares traded on the bourse. IIG was also the top performer in terms of 1H-2005 profit, registering a gain of about 838.96% compared to same period last year. The newly listed stock on Kuwait bourse, Grand Real estate Company is also managed and owned by IIG. As a result of recent developments, the stock appreciated by 46.7% in August ‘05 to end at 550 fils. In addition, 29 stocks out of 34 stocks listed under the investment sector reported monthly gains.
Food sector also reported positive performance on back of good corporate results by all the five companies listed in the market. United Fisheries of Kuwait (UFK) along with United Industries Company and other investors established a real estate development Company with a capital of KD16.5mn. UFK was also awarded two international certifications under the guidance of international certification organizations Societe Generale de Surveillance SA (SGS-SA) and Specialised Industrial & Management Systems (SIMS). The share of UFK ended the month at 440 fils, reporting a monthly gain of 14.3%. It is also reported that Kuwait Food Company is in final stages of negotiations to acquire a share in Domti Products Company in Egypt.
Public Warehousing Company (PWC), a market heavy weight came out with a right issue to increase capital by 16.64 percent, which will be managed by National Bank of Kuwait (NBK). PWC was also awarded a 5 year contract, worth US$180mn by the US Defence Logistics Agency. PWC and KOC will sign a contract for the transportation of heavy machinery used in oil drilling to the local market. Despite positive developments by the company, the stock ended the month in red may be because of rights issue (increase of capital), registering a drop of 8.9%.
The volume of shares traded during the month reached its second highest level for the year, at 5.1bn shares, up 58.5% compared to last month. Osoul leasing and Investment Company (Osoul) made its way into the top five volume leaders. The company reported 59.68% profit growth in the 1H-2005, which helped its price scale higher by 26.3%. The value of shares traded also rebounded to record an increase of 41.04% over the last month.
The market breadth was skewed positively with 106 stocks advancing in the month and 36 stocks declining, while 7 stocks remained unchanged. Among the major advancers during the month included Al Dar National Real Estate (+50%), International Resorts Company (+47.6%) and International Investment Group (+46.7%). Out of the 106 advancers during the month, 51 stocks have seen double digit growth on back of good corporate earnings, indicating broad-based buying activity. On the flip side, the major decliners included Metal & Recycling Co. (-16.74%), Bayan Investment Co (-14.8%) and Sultan Center food Products (-13.5%).
The market added two new companies during the month, further improving the depth of the market. Al Deera Holding Company was listed under investment sector, where as Grand Real Estate Projects Co. under the real estate sector, which increased the total number of listed companies to 149. So far, 24 new companies have been added to the market in 2005. We expect the trading activity to increase further as the investors take new positions in anticipation of positive 3Q corporate earnings. We also believe that the rights issue of market heavyweights MTC and PWC are likely to evoke strong investors’ interest.
