GCC index declines 11 pct in May

08/06/2010 00:00 AST

GCC markets followed global cues in May; due to lack of local/regional trading stimulus in addition to the tumble in crude oil prices, leading the MSCI GCC index to an 11 percent monthly decline, which is the largest monthly loss since November 2008 says the recent report published by Kuwait Financial Center “ Markaz”... This loss all but eradicated the gains seen since the beginning of the year, bringing the YTD return to just 1 percent. The GCC loss was driven by an 11 percent decline in Saudi Arabia, its first monthly decline of 2010, as Sabic’s tumble and crude oil price declines weighed heavily on the index. All GCC markets suffered losses in the mid-high single digits.

The sharp drop in crude oil prices triggered a panic in local markets, leading to sharp monthly losses. Sabic shed a massive 15 percent for the month in reaction to the fall in oil prices. In Kuwait, trading in Zain has been halted as shareholder’s approved the 2009 dividend. The Dubai market, down 9 percent in May, continues to be battered by ongoing corporate difficulties.

Liquidity was down across the GCC in May, with volume and value traded declining 17 percent and 2 percent, respectively. In terms of volume, only Saudi witnessed a monthly increase (24 percent) while Kuwait saw the largest decline of 37 percent. Likewise, for value traded, Saudi saw an increase of 15 percent to $26 bn while Kuwait was down by half to $2.6 bn for May. Volatility was up in almost all markets, with Saudi MVX leading the way with a tripling of risk as per the Markaz Volatility Index; pan-GCC risk was up about 2.5x in May with only Bahrain witnessing a decline (7 percent).

Global Markets review

World markets took a severe turn south in May as a Chinese economic pullback, East Asian political tensions, a decline in crude oil prices, and continued economic uncertainty in Europe soured global sentiment. MSCI World lost 10 percent in May, erasing the gains made so far this year and taking the YTD performance to a loss of 6 percent.

Monthly returns were sharply negative across the globe with Europe leading the way on a monthly decline of 13 percent; India managed to limit its monthly loss to 3 percent as economic growth projections are stable. The CBOE VIX index, as a result of the volatility of market returns, saw its largest monthly jump since September 2008 spiking 45 percent in May. Kuwait Financial Centre ‘Markaz’, with total assets under management of over KD 921 million as of March 31, 2010, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.

Arab Times