kuwait economic brief€¦ · fy10/11: kuwait still heading towards huge surplus even after amiri...

An update of recent developments in select sectors in Kuwait published by Economic Researchat NBK

Kuwait Economic Brief

April 2011

Oil Prices sustained above $100... Large budget surplus expected again in FY 2011/2012

total Real estate sales

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Value of Traded Shares (left) KSE Index (right)

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moNetaRy INdICatoRs(y/y percent growth)

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Money Supply (M2) Credit Facilities

KUWaIt’s CRUde oIl pRICe aNd pRodUCtIoN

Oil Output (left) Oil Price (right)

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Mar-10 Jun-10 Sep-10 Dec-10 Mar-11

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oil market & Budget developments..............2KEC climbs to USD 117 on Libya concerns and dollar weakness

public Finance.................................................4 FY10/11: Kuwait still heading towards huge surplus even after Amiri grant

monetary developments.................................5Large jump in February money supply thanks to Amiri grant…credit flat on month

Real estate.......................................................6Strong activity in investment real estate

Corporate earnings.........................................8Excluding Zain’s nonrecurring gain, banks outperform

Kuwait stock exchange................................12KSE continues to decline in the absence of any positives

Economic Brief - April 2011

(million KD)


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KUWaIt eXpoRt CRUde(dollars per barrel)

70

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4Q10 1Q11 2Q11F 3Q11F 4Q11F 1Q12F

oil market & Budget developments

KEC climbs to USD 117 on Libya concerns and dollar weaknessOil prices took yet another leg up in early April. The price of Kuwait Export Crude (KEC) jumped to USD 117 per barrel (pb) on April 8th, up from USD 108 at the end of last month and a similar average for March as a whole. Other major benchmark crude prices also rose. The price of Brent crude – the main European blend – breached the USD 120 mark for the first time since August 2008. The price of West Texas Intermediate (WTI) rose USD 8 from late March to USD 112, but continues to trade at a discount to other crudes because of oversupply issues at its US delivery point.

Two key factors are responsible for the latest price rise. Firstly, fierce fighting between government and opposition forces has strengthened perceptions that Libyan oil will be shut-in for an extended period. Although a rebel-controlled oil company was set to make its first oil export shipment of some 1 million barrels in early April, the military superiority of the government forces has led some analysts to speculate about the possible targeting of the country’s oil infrastructure to choke-off rebel funding. African output was also disrupted by a strike by oil workers in Gabon, which normally produces some 240,000 barrels per day (bpd).

The second key factor has been the growing expectation – subsequently realized on April 7th – of a rise in official interest rates in the Euro area. By widening the spread between Euro and US rates, this tends to weaken the US dollar, which typically boosts the price of dollar-denominated commodities. Something like this occurred in mid-2008, when a surprise hike in Euroland interest rates generated a USD 16 pb jump in crude prices in the space of just two days.

After last year’s huge rise of 2.9 million bpd (3.4%) – the second largest increase in 25 years – global oil demand growth is set to moderate in 2011. This is largely the result of reduced economic growth prospects as both monetary and fiscal policy are tightened. But in addition, high oil prices are themselves expected to provide a drag on demand, particularly in the slow-growth OECD region.

The disaster in Japan is expected to reduce oil demand there in the very short-term. But this may be partially offset for 2011 as a whole by stronger oil demand as lost nuclear power generation capacity is replaced by conventional facilities. Japan accounts for around 5% of global oil demand.

The Centre for Global Energy Studies (CGES) and the International Energy Agency (IEA) both expect oil demand growth of 1.4 mbpd (1.6%) in 2011, bsed on flat-to-falling demand in the OECD region and growth of 3.3 to 3.7%% in non-OECD countries. Within this overall figure, however, growth is expected to slow considerably in the second half of the year as the impact of policy tightening begins to feed through.

Output of the OPEC-11 countries (excluding Iraq) rose by 132,000 bpd (0.5%) in February. This was its third big consecutive month-on-month increase and leaves output 0.7 mbpd above its November level. These figures do not include the full impact of the crisis in Libya on production levels, which should materialise in March’s data. Libyan output dropped 0.23 mbpd to 1.4 mbpd in February, but is said to have dropped to 0.2-0.3 mbpd since. February’s drop in Libyan output was more than offset by a strong 280,000 bpd rise in Saudi Arabian output to 8.9 mbpd. It is likely to have risen further in March. Other countries, such as Venezuela, the UAE and Kuwait have also seen significant increases in output in recent months.

Analysts’ expectations of the rise in non-OPEC oil supply likely this year range between 0.5 and 1.3 mbpd, which includes around 0.5 mbpd of OPEC natural gas liquids (NGLs). This arithmetic suggests that OPEC may have to raise production significantly over and above that needed to compensate for Libya if the world oil market is to avoid another inventory drawdown this year. And if it does, markets could become increasingly edgy over the continued erosion of the organization’s spare production capacity (which some analysts put at below 3 mbpd), and therefore its ability to react to future shocks.

Our latest central projection for oil prices assumes that oil demand increases by a consensus-looking 1.4 mbpd

KeC pRICe sCeNaRIos (dollars per barrel)

scenario

low price Base Case High price

2010 76.2 76.2 76.2

1Q11 99.4 99.4 99.4

FY10/11 82.5 82.5 82.5

2Q11f 101.1 105.8 109.3

3Q11f 97.1 107.7 118.1

4Q11f 89.5 106.7 127.5

2011f 96.8 104.9 113.6

1Q12f 89.5 106.7 127.5

FY11/12f 94.3 106.7 120.6

3

this year. Meanwhile, non-OPEC oil production (including OPEC NGLs) is projected to rise by an above-consensus 1.2 mbpd, with increases from Brazil, Candada and the Former Soviet Union. If stocks are to be rebuilt to more comfortable levels, OPEC may still need to increase its own production by some 1.6 mbpd.

Given the problems in Libya, the sluggish supply repsonse from OPEC so far and the potential for new supply disruptions – in Nigeria, for example – OPEC output seems unlikely to climb that far; a 0.9 mbpd increase might be more realistic. Under those conditions, stock levels remain more or less unchanged this year. The price of KEC would remain in the USD 105 to USD 110 pb range into early 2012.

It is possible, however, that OPEC output will fail to rise by even this much, either due to unexpected supply disruptions or because MENA policy makers become distracted by local political unrest. An OPEC production increase by 0.7 mbpd this year would generate a drop in stock levels this year, sending crude prices higher for the rest of this year. The price of KEC would finish the year close to USD 130 pb.

On the other hand, the growth in global oil demand could turn out to be weaker than expected, either because of the impact on economic growth of policy tightening, or perhaps because of the disruption to Japanese exports and its knock-on effect on the global supply chain. If global oil demand rises by just 1.2 mbpd this year, the price of KEC could drop back to USD 90 by end-year. This may not be a big enough drop to cause OPEC to cut back on its production levels.

The price of KEC averaged USD 82.1 pb in FY 2010/11, up 20% on FY 2009/10. Although official figures have not yet been released, we expect this to have generated budget oil revenues – which account for around 95% of all budget revenues - of some KD 19.7 billion, or 19% higher than in the closing accounts of the year before. If, as we expect, actual government spending comes in 5-10% below budget, last year’s budget surplus should end-up near KD 4.7 billion before allocations to the Reserve Fund for Future Generations (RFFG). This incorporates unplanned spending of KD 1.1 billion arising from the Amiri cash grant paid to citizens in February.

The three price scenarios described above generate oil prices of between USD 94 and USD 121 pb in FY 2011/12 and would be very likely to yield another big budget surplus. Based upon preliminary government statements, total budget spending may be set at KD 17.9 billion this year. Based upon our assumptions, this would yield a surplus of between KD 5.6 billion and KD 14.2 billion, before allocations to the RFFG. This compares with the government’s projection of a KD 4.5 billion deficit.

BUdGet FoReCast(million KD, unless otherwise noted)

Under alternative oil price scenarios Fy 2010/11 Fy 2011/12

official low Base High prelim. low Base HighBudget Case Case Case Budget Case Case Case

Oil Price ($/barrel) 43.0 82.5 82.5 82.5 60.0 94.3 106.7 120.6

total Revenues 9,719 20,776 20,776 21,012 13,445 22,679 25,835 30,359

Oil Revenues 8,617 19,674 19,674 19,910 12,307 21,541 24,697 29,222

Non-Oil Revenues 1,102 1,102 1,102 1,102 1,138 1,138 1,138 1,138

Expenditures (official) 16,160 16,160 16,160 16,160 17,932 17,932 17,932 17,932

surplus (deficit) -6,441 4,616 4,616 4,852 -4,487 4,747 7,903 12,427

After RFFG -7,413 2,539 2,539 2,751 -5,832 2,479 5,320 9,391

Expenditures (NBK estimate) 16,452 16,048 15,644 17,035 16,587 16,139

surplus (deficit), NBK estimate 4,324 4,728 5,368 5,644 9,248 14,221

After RFFG 2,247 2,651 3,267 3,376 6,664 11,185

Note: FY2010/11 NBK government expenditure scenarios include KD 1.1 billion in unplanned spending arising from the February 2011 Amiri grant.


4

public Finance

FY10/11: Kuwait still heading towards huge surplus even after Amiri grant 11 months into the fiscal year 2010/2011, budget spending seems to be very much on track compared to previous years. Yet, despite the increased spending, high oil prices are leading Kuwait towards another massive annual budget surplus, its 12th in a row.

Total spending is up 43% compared to the same period last year. This increase was due to both special and genuine factors. Two special intra-government transfers were: a one-off payment to the social security fund and the impact of higher oil prices on fuel subsidies. Excluding these government transfers and other items deemed insignificant to economic growth, demand-impacting spending1 was up a notable 27% on the period.

Up until the previous reported monthly figures, demand-impacting spending was up a decent 9% year on year (y/y). Growth was driven primarily by the increase in capital spending, clearly as part of the government’s commitment to the development plan. The revision with this month’s data to a 27% rise came as a result of the KD 1.1 bn Amiri grant. So far this year, demand-impacting spending is at 68% of budget, well above the historic average of 57%.

The increase in expenditures so far this year was not only driven by a larger budget but also by a more adamant commitment by the government to stay on track with its spending plan. 11 months into the year, total spending is at 68% of budget, in good comparison with historic average. (See table.) But more importantly this performance is led by capital spending (Chapter 4): 56% of its annual budget has already been spent, compared to just 41% on average. (Chart) Although these rates still appear low, reported spending typically speeds up in the final months of the year and is also adjusted further upwards in the closing statements.

Total revenues were up 17% largely reflecting the rise in oil prices. At USD 80 per barrel on average in the first 11

months, oil prices were 18% higher than a year ago. The increase in oil revenues accounted for 87% of the total increase in revenues while non-oil revenues were also up an impressive 40%. This was partly due to a 15% increase in customs receipts, reflecting an improvement in trade activity. However, the bulk of the increase represented large payments from the United Nations Compensation Committee invasion (UNCC) for losses arising from the 1990 Iraqi invasion.

With one month to go in FY10/11 the budget shows a surplus of KD 7.7 bn. However, when the final accounts are due and all spending accounted for, we expect Kuwait’s 12th consecutive surplus to be KD 4.5 billion.

pRojeCts, maINteNaNCe & laNd pURCHases(Spending rate: % actual spending / budget)

5 year historical average FY10/11

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ReVeNUes & eXpeNdItURes - eleVeN moNtHs oF FIsCal yeaR 2010/11

11 mos: actual to Budget

levels Change Fy10/11 v/s

average*mn KD mn KD % %

total Revenues 18,668 2,650 192.1 200.2

Oil Revenues 17,479 2,309 202.9 214.9

Non-Oil Revenues 1,189 341 107.8 99.5

total expenditures 10,973 3,288 67.9 62.4

Wages & Salaries 2,060 16 57.6 59.5

Goods & Services 1,632 104 55.6 61.5

Vehicles & Equipments 77 -73 34.2 26.4

Projects. Maintenance & Land Purchases 1,173 348 55.9 41.2

Misc. Exp. & Transfers 6,030 2,894 82.4 70.3

surplus (before RFFG) 7,695 … … …

demand Impacting expenditures 7,245 1,518 67.6 56.6

# Average for comparable period, last 5 years

5

monetary developments

Large jump in February money supply thanks to Amiri grant…credit flat on month During February, money supply (M2) expanded 6.3% m/m (up KD 1.6 billion), largely caused by the payment of the KD 1.13 billion Amiri grant on February 22nd. The grant counted as an injection of money since the government transferred money from an oversea account to complete the payment. As a result, the Central Bank of Kuwait’s (CBK) net foreign assets showed a large 29.6% m/m increase (up KD 1.5 billion).

Outstanding credit to residents was almost flat in February, down only KD 6 million m/m. Growth slipped to 0.4% y/y as a result, down from 0.6% in January.

Personal facilities fell KD 37 million m/m, largely led by a KD 28 million decline in loans for the purchase of securities. Also, lending to the household/consumer sector, which had seen steady growth recently, fell KD 9 million m/m. The decline is understandable in light of the large grant, which drove many consumers to either put off taking new loans or to repay some of their outstanding loans.

Otherwise, real estate loans fell KD 24 million. The declines were however offset by a KD 65 million increase in loans to “productive” sectors (trade, industry, and construction).

Resident deposits rose KD 1.4 billion m/m, as Amiri grant payments made their way into beneficiaries’ accounts.

eXCHaNGe Rates

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Most of the money was still in sight and saving accounts at the month-end, as consumers looked forward to spend the grant over subsequent days.

Average rates offered on KD private deposits, although up slightly in February, remain close to record lows on the back of ample liquidity at banks. 3-month and 6-month KD deposits rates were up 1 bp in February to 1.18% and 1.45%, respectively. The 12-month rate rose 2 bps to 1.74%. 1-month rate was flat at 0.97%.

The inflow of grant money left banks with sizeable excess liquidity. CBK issued KD 203 million in bonds and accepted KD 344 million in time deposits to mop up this liquidity. Meanwhile, banks kept an additional KD 345 million in cash balances, probably in anticipation of further withdrawals from the fresh grant money. All in all, bank assets rose KD 1.2 billion m/m.

During the first quarter of 2011, the Dinar fell around 4% against the Euro, while improving around 1% against the dollar. This has largely been the result of a stronger Euro during this period.

moNetaRy HIGHlIGHts - FeBRUaRy 2011Change

Feb 2011 mom 3-mnth yoymn KD % % %

local Bank assets 42,561 2.9 2.3 4.3of which:

Claims on Government 1,878 -1.3 -1.2 -2.4Credit to Residents 25,254 -0.0 0.7 0.4Foreign Assets 7,316 1.8 -2.2 -0.1

money supply (m2) 26,981 6.3 6.1 5.2Private Deposits 25,917 5.6 5.2 4.3

KD Sight Deposits 5,345 13.2 12.1 23.3KD Savings Deposits 3,412 13.7 15.0 19.3KD Time Deposits & CDs 14,913 0.3 0.9 -0.4FC Deposits 2,247 14.2 5.7 -16.2


6

Real estate

Trend remains positive despite drop in January… investment property strongIn February, real estate activity continued to show improvement, spurred primarily by sales in the residential and investment sectors. Total sales reached KD 217 million, and have been close, or above, the KD 200 million mark for the past three months (Chart). Total sales were more than twice their year-ago level, and were up 12% on the month (KD value, m/m). Overall sales have been trending higher since the middle of 2009 (Chart) when the Kuwait and the world economies started recovering from the financial crisis.

The residential sector totaled sales of KD 91.2 million (Chart and Table). In January-February, sales averaged over KD 100 million for the first time since mid-2010, when sales benefitted from a rise in the distribution of plots/units

by the government (Chart). The average transaction size is rising as well, possibly pointing to firmer values or to better quality units or both. The transaction size has risen significantly from under KD 225,000, for most of 2010, to about KD 280,000 in February 2011.

In the investment sector (apartments and buildings), sales posted a very solid volume of KD 122.6, their best level since July 2007, pushing the 3-month average to a recent high of KD 86 million. (Chart and Table). The average transaction size was pushed up significantly due to some large transactions in the month. The higher transaction value, again, could indicate higher prices and/or larger and better quality properties. This adds credence to reports that Kuwaiti investors are looking favorably on this “income generating” sector.Activity in the commercial sector (Chart 4) is typically

ResIdeNtIal Real estate


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Real estate sales & sCB HoUsING loaNsmonthly avg. dec jan Feb % %

Real estate sales 2009 2010 2010 2011 2011 m/m y/y

sales Values (mn Kd) 108.7 166.1 236.4 193.6 217.0 12.1 118.2Residential Property 55.5 91.7 103.0 121.4 91.2 -24.8 72.3Apartments 36.9 54.4 71.3 63.3 122.6 93.8 187.6Commercial 16.3 20.0 62.1 9.0 3.2 -64.9 -18.8

Number of transactions 382 561 601 533 407 -23.6 6.3Residential Property 277 425 471 394 290 -26.4 13.7Apartments 100 130 118 133 113 -15.0 -8.9Commercial 6 6 12 6 4 -33.3 0.0

average transaction size (000 Kd) 281.2 302.2 393.3 363.3 533.2 46.8 105.3Residential Property 199.3 215.8 218.6 308.1 314.6 2.1 51.5Apartments 373.3 437.4 604.2 475.7 1085.1 128.1 215.6Commercial 2880.6 3295.2 5176.7 1498.8 789.5 -47.3 -18.8

monthly avg. dec jan Feb % %sCB Housing loans 2009 2010 2010 2011 2011 m/m y/y

Value of approved loans (mn Kd) 13.5 7.8 6.4 7.6 7.4 -3.8 -3.0New Construction 8.0 2.3 2.0 2.4 2.1 -10.5 -18.6Purchase of Existing Homes 3.9 3.9 3.0 3.4 3.3 -1.5 1.6Additions & Renovations 1.6 1.6 1.4 1.9 1.9 0.6 12.0

Number of approved loans 371 265 169 199 199 0.0 -27.4New Construction 126 44 36 41 35 -14.6 -30.0Purchase of Existing Homes 77 83 61 70 70 0.0 2.9Additions & Renovations 167 138 72 88 94 6.8 -39.7

Value of disbursed loans (mn Kd) 12.8 11.4 10.2 8.9 7.3 -18.2 -38.0New Construction 7.8 5.9 5.0 5.0 3.7 -25.3 -42.7Purchase of Existing Homes 3.3 3.7 3.2 2.4 2.2 -8.4 -40.7Additions & Renovations 1.6 1.7 1.7 1.5 1.4 -10.5 -11.8

7

volatile and influenced by erratic large transactions. With that in mind, commercial property sales declined for the second consecutive month to register KD 3.2 million on 4 transactions. Recently, KD sales are averaging better than levels witnessed in 2009 and 2010, suggesting slowly improving conditions.

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8

Corporate earnings

Excluding Zain’s nonrecurring gain, Banks outperformCorporate earnings of 173 companies that have announced their 2010 full year results summed up to KD 1.8 bn, more than doubling in value compared to 2009. Nevertheless; profits remained a far cry from pre-crisis level.

An important factor to consider when assessing the performance of companies in 2010 is the non-recurring profit which Zain realized from the sale of its African asset. Excluding this extraordinary gain (KD 754mn), total earnings would be reduced to a little over KD 1bn. Yet, year on year (yoy) growth of the same reporting companies in 2009 would still be a notable 60%. For the sake of comparison, the following analysis would exclude this one-time Zain gain.

The two best performing sectors in term of growth were the industrial sector and insurance sector. But the two sectors still had minimal contribution to total profits. Bank profits on the other hand make up almost half of total earnings, and at KD 575 mn, are up 62% compared to 2009. And while earnings of service companies remain the second biggest contributor to total profits, they were down 26% on the year. Zain was the strongest gainer (even without its one-time gain) followed by Kuwait’s two

largest banks the National Bank of Kuwait (NBK) and Kuwait Finance House (KFH).

In terms of losses, both investment and real estate companies are the two sectors which remain well in negative territory, over two years after the crisis. Global Investment House still tops the list of biggest losers followed by the non-Kuwaiti Ithmar Bank and National Real Estate Company. It’s also worth noting that more than 30 companies from both these sectors have yet to announce their results for the year (and thus losses may well be understated).

CoRpoRate eaRNINGs HIstoRy & GRoWtH

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(million KD)

CoRpoRate eaRNINGs By seCtoR 2010

Banks,48

32Services,

Non-Kuwaiti, 7

5Food,

Industrial, 6 Insurance, 2

(percent)

seCtoR peRFoRmaNCe(million KD) Net profits

Growth %2010 2009

Banking 575 356 62

Investment -70 -278 …

Insurance 22 4 420

Real Estate -60 -34 …

Industrial 78 11 582

Services 1,126 502 124

Food 55 49 12

Non-Kuwaiti Companies 86 54 59

total market 1,813 664 173

Kuwaiti Companies 1,726 610 183

CompaNy pRoFIts - 2010

Highest earnings million Kd

1. Zain 1,063

2. National Bank of Kuwait 302

3. Kuwait Finance House 106

4. National Mobile Telecommunications 78

5. Ahli United Bank 76

lowest earnings million Kd

1. Global Investment House -73.2

2. Ithmaar Bank -39.9

3. National Real Estate -34.4

4. The Sultan Center -34.4

5. Mashaer Holding Company -24.9

(million KD)

9

CoRpoRate eaRNINGs - 2010 (thousand KD)

Code Company Name Full Year Growth Fourth Quarter Growth2010 2009 % 2010 2009 %

Banks

101 National Bank of Kuwait 301,686 265,219 14 77,158 63,676 21102 Gulf Bank 19,059 -28,073 … 8,695 -21,051 …103 Commercial Bank 40,535 150 26,923 20,000 1,815 1,002104 Al-Ahli Bank 53,178 39,175 36 11,643 14,917 -22105 Ahli United Bank 27,445 14,261 92 7,883 -854 …106 Kuwait International Bank 16,754 -8,234 … 3,619 -3,589 …107 Burgan Bank 4,655 6,211 -25 7,683 -7,289 …108 Kuwait Finance House 105,983 118,741 -11 8,642 12,357 -30109 Boubyan Bank 6,110 -51,694 … 1,594 -34,431 …

Investment201 Kuwait Investment Co. … -13,529 … … -18,548 …202 Commercial Facilities 17,142 14,267 20 2,275 4,597 -51203 International Financial Advisors -18,261 -16,797 … … -9,577 …204 National Investments 4,426 -26,076 … -1,788 -20,570 …205 Kuwait Projects Company (Holding) 45,027 46,318 -3 13,978 703 1,888206 Al-Ahlia Investment -21,858 … … -10,283 … …207 Coast Investment & Development 5,800 -13,699 … 493 -12,840 …208 The International Investor … -19,359 … … -6,001 …209 Securities House … … … … … …210 Industrial & Financial Investments … -8,167 … … … …211 Securities Group … … … … … …212 International Finance Co. -6,772 121 … -7,135 -2,539 …213 Kuwait Financial Centre 8,123 2,573 216 1,211 -1,582 …214 KMEFIC -8,912 -9,442 … -3,646 -3,943 …215 International Investment Group … … … … … …216 Aref Investment Group … … … … … …217 Al-Dar Investment … … … … … …218 Al-Aman Investment -8,136 -17,618 … -6,156 -4,907 …219 First Investment Co. … -22,902 … … -14,952 …220 Al-Mal Investment 12,017 -12,363 … 15,958 -5,406 …221 Gulf Investment House … -20,531 … … -13,729 …222 A›ayan Leasing & Investment Co. … … … … … …223 Bayan Investment Co. -12,764 -19,348 … -4,311 -15,141 …224 Global Investment House -73,206 -148,826 … -26,965 -44,657 …225 Osoul Leasing & Investment Co. -583 -3,877 … -586 -1,667 …226 GulfInvest … … … … … …227 Kuwait Finance & Investments Co. … -12,545 … … -10,865 …228 KIPCO Asset Management Co. 1,820 6,317 -71 122 5,437 -98229 International Leasing & Investment Co. … … … … … …230 Kuwait Invest Co. (Holding) -3,709 -4,588 … -1,418 -6,544 …231 National International Co. (Holding) -7,056 -5,130 … -6,401 -4,726 …232 Housing Finance … -14,709 … … -3,484 …233 Al Madar Finance & Investment … -17,339 … … -8,683 …234 Al-Deera Holding Co. -12,976 -12,448 … -2,868 -9,029 …235 Al Safat Investment … -16,136 … … -9,389 …236 Al Salam Group Holding Company -2,366 289 … -948 -54 …237 EKTTITAB Holding Company -5,933 -14,948 … -642 -12,621 …238 Al Qurain Holding Company 559 -33,874 … 455 -4,140 …239 Sokouk Holding … -28,910 … … -28,216 …240 Al Madina for Finance & Investment -8,243 -9,529 … -2,425 -7,017 …241 Noor Financial Investment … -28,800 … … -16,830 …242 Al Tamdeen Investment 3,440 2,266 52 670 -164 …243 Kuwait Bahrain International Exchange 662 767 -14 118 109 8244 DAMAC Kuwaiti Holding -2,765 -4,613 … 1,004 -347 …245 KUWAIT SYRIAN HOLDING 437 -2,071 … -155 -1,985 …246 Strategia Investment co. -952 -4,677 … … 126 …247 Kuwait China Investment Co. 4,619 8,683 -47 2,477 -3,378 …248 Manafae Investment Co. -941 88 … -344 35 …249 Gulf North Africa Holding Co. 285 … … -4 … …250 Amwal International Investment Co. … 144 … … … …251 Al-Masar Leasing & Investment Co. K.S.C … … … … … …

Insurance301 Kuwait Insurance 3,897 -6,235 … 716 -1,749 …302 Gulf Insurance 7,692 5,049 52 1,120 -784 …303 Al-Ahlia Insurance 8,275 8,163 1 2,039 -717 …304 Warba Insurance 2,580 1,682 53 66 -588 …305 Kuwait Re-Insurance 1,988 914 117 247 -28 …306 First Takaful Insurance -1,418 78 … -565 -416 …307 Wethaq Takaful Insurance Co. -867 -5,391 … 37 -701 …

Real estate401 Kuwait Real Estate -20,712 2,137 … -23,280 -1,822 …402 United Real Estate 5,554 3,871 44 937 2,017 -54403 National Real Estate -34,449 29,520 … -45,070 8,958 …404 Salhia Real Estate 10,204 7,248 41 960 2,065 -54405 Pearl of Kuwait Real Estate 58 … … -143 … …


10


Code Company Name Full Year Growth Fourth Quarter Growth

2010 2009 % 2010 2009 %408 Ajyal Real Estate Entertainment Co. 42 -6,206 … 7 -1,426 …409 Al-Massaleh Real Estate Co. 2,376 81 2,833 1,660 51 3,155410 Arab Real Estate 484 3,187 -85 … -2,695 …411 Union Real Estate 1,309 1,276 3 289 282 2412 Enma›a Real Estate 674 -8,321 … 78 -7,818 …413 Mabanee Co. 18,670 15,309 22 3,100 140 2,114414 Injazzat Real Estate Development 1,300 -20,196 … 923 -23,013 …415 Jeezan Holding -4,653 -3,886 … -510 -3,219 …416 Investors Holding Group -19,880 … … -19,101 … …417 International Resorts Co. -2,513 -3,303 … -1,331 -1,931 …418 Commercial Real Estate Co. 5,551 19,056 -71 1,231 937 31419 Sanam Real Estate Co. -6,164 -969 … -6,146 -1,834 …420 A›ayan Real Estate Co. 1,858 3,089 -40 -438 861 …421 Aqar Real Estate 119 -1,321 … 71 -1,272 …422 Kuwait Real Estate Holding -4,173 -9,045 … -2,629 -9,056 …423 Al Mazaya Holding -8,610 5,135 … -10,156 -4,891 …424 Al Dar National Real Estate … -14,214 … … -4,045 …425 Al-Themar International Holding … … … … … …426 Grand Real Estate Projects … … … … … …427 Tijara & Real Estate Investment -2,645 -4,893 … -2,428 -4,194 …428 Tameer Real Estate Investment 96 … … -763 … …429 Arkan Al-Kuwait Real Estate -2,274 -1,637 … -1,859 -1,824 …430 Safat Global Holding … … … … … …431 Al-Argan International Real Estate 3,983 3,362 19 65 12 443432 Abyarr Real Estate Development Co. -4,997 -29,247 … -2,115 -34,254 …433 Munshaat Real Estate Projects Co. … -44,270 … … -45,744 …434 First Dubai For Real Estate Development -21,763 -15,532 … … -6,337 …435 Kuwait Business Town real estate 351 -10,722 … 491 -9,150 …436 Manazel Holding Co. -4,912 -15,477 … -3,348 -6,686 …437 Real Estate Asset Managemnet Co - Ream 547 756 -28 40 -55 …438 Mena Real Estate Co. … … … … … …439 Al Mudon International Real Estate 310 137 127 182 -176 …440 Real Estate Trade Centers 5,454 … … … … …441 Kuwait Remal Real Estate 9,521 … … … … …

Industrial501 National Industries -19,200 -23,187 … -19,770 -23,616 …502 Kwt Pipes Industries & Oil Services 387 -5,190 … 1,499 -6,444 …503 Kuwait Cement 13,358 12,813 4 2,070 -2,122 …504 Refrigeration Industries 1,067 -3,332 … 670 -3,361 …505 Gulf Cable & Electrical Industries 26,403 10,523 … 2,407 1,673 44506 Heavy Engineering Ind. & Shipbuilding 4,837 4,866 -1 1,449 951 52507 Contracting & Marine Services 2,034 3,352 -39 -62 267 …508 Kuwait Portland Cement 22,290 12,174 83 5,391 -1,907 …509 Shuaiba Paper Products 1,200 1,668 -28 148 711 -79510 Metal & Recycling -496 -3,973 … -466 -3,096 …511 Kuwait Foundry 5,872 6,846 -14 1,513 73 1,973512 Aerated Concrete Industries 3,472 3,758 -8 -2,027 -2,040 …513 United Industries 4,046 -7,359 … -268 -3,401 …514 Boubyan Petrochemical Co. … … … … … …515 Gulf Glass Manufacturing 2,939 3,056 … 757 -105 …516 Al-Hilal Cement 715 27 2,581 205 -288 …517 Al Kout Industrial Projects Co. 2,746 2,415 … 111 -9 …518 Kuwait Packaging Materials Manufac. 965 1,467 -34 72 249 -71519 Kuwait Building Materials Manufac. 194 562 … 8 24 -67520 National Industries Co. for Bldg. 4,082 -2,661 … -1,179 -2,231 …521 Gulf Rocks Co. 54 1,095 … -219 234 …522 Equipment Holding 484 -11,414 … … -857 …523 Mena Holding … 7,159 … … 1,654 …524 National Co. for Consumer Industries -434 -70 … -368 -46 …525 Kuwait Gypsum Manuf. & Trading 434 585 -26 31 74 -58526 Qurain Petrochemical Industries -1,902 7,098 … -318 -693 …527 Salbookh Trading Co. -2,034 -2,700 … -979 -962 …528 IKARUS Petroleum Industries 4,400 -994 … 60 -837 …529 Boubyan International Industries Holding … … … … … …

services601 Kuwait Cinema 5,017 2,990 68 978 795 23602 Kuwait Hotels -2,671 2,062 … -3,100 473 …603 Agility 25,108 156,427 -84 -24,462 40,877 …604 Kuwait Commercial Markets Complex -5,754 -3,753 … -1,862 -4,410 …605 Zain Kuwait 1,062,806 195,008 445 87,170 -683 …606 Al Safat Energy Holding Company -4,375 393 … … 117 …607 Educational Holding Group … -17,702 … … -4,417 …608 Independent Petroleum Group 4,485 6,000 -25 1,537 1,764 -13609 National Cleaning Co. 1,379 894 54 411 178 131610 The Sultan Center -34,436 3,799 … -37,862 -4,591 …611 Al-Arabi Holding 815 -413 … 147 -64 …

11


Code Company Name Full Year Growth Fourth Quarter Growth2010 2009 % 2010 2009 %

613 Wataniya 78,020 108,291 -28 24,276 10,969 121614 Kuwait & Gulf Link Transport Co. -4,439 625 … -4,800 2,025 …615 Kuwait Cable Vision -2,825 -1,115 … 31 -583 …616 Automated Systems Co. 524 1,548 -66 -134 44 …617 National Petroleum Services Co. 1,589 2,172 -27 576 96 500618 Kuwait Co. For Process Plant Cons.& Cont. 1,260 1,956 -36 84 587 -86619 Kuwait Slaughter House 484 403 20 96 52 85620 EYAS for Higher & Technical Education 2,334 -751 … 250 -323 …621 Nibras Holding Co 203 447 -55 -816 396 …622 Al Safwa Group -17,668 -7,097 … … -2,841 …623 Human Soft Holding 221 865 -74 219 523 -58624 Kuwait Privatization Project Holding 2,006 3,085 -35 35 -1,263 …625 Nafais Holding Company … -26,750 … … -3 …626 National Slaughter House 247 28 799 80 -73 …627 Aref Energy Holding 10,798 -7,959 … -494 -7,927 …628 Safwan Trading & Contracting 1,839 1,656 11 611 690 -12629 Gulf Petroleum Investment … -8,788 … … -5,585 …630 Gulf Franchising -1,892 -5,040 … -687 -1,512 …631 Credit Rating and Collection -157 -3,544 … -273 -3,298 …632 National Ranges Co. … -1,396 … … -2,136 …633 Burgan Co. for Well Drilling … … … … … …634 IFA Hotels & Resorts -19,523 30,847 … … … …635 Combined Group Contracting 8,894 8,194 9 1,487 1,398 6636 Jeeran Holding … … … … … …637 Palms Agro Production 823 1,069 -23 206 30 586638 Al-Safat Tec Holding Co. … 2,896 … … 1,409 …639 Mushrif Trading & Contracting 1,603 799 101 68 -571 …640 United Projects Group 3,277 4,021 -19 168 857 -80641 Al Abraj Holding … … … … … …642 Aviation Lease & Finance 10,767 … … 3,009 … …643 Al-Mowasat Holding 1,303 297 339 612 10 6,019644 Mashaer Holding Company -24,948 4,644 … -24,194 795 …645 Oula Fuel Marketing Company 2,887 3,393 -15 724 768 -6646 Villa Moda Life Style … … … … … …647 Future Communications 3,216 3,390 -5 816 922 -12648 Network Holding Company … … … … … …649 Hayat Communication Co. 1,214 1,237 -2 824 733 12650 Mubarrad Transport Co. -179 -7,859 … -108 -5,590 …651 Kuwait Resorts Co. -3,939 -2,970 … -4,780 -1,677 …652 Advanced Technology Co. 4,628 5,013 -8 1,309 1,246 5653 Yiaco Medical Company 4,498 1,392 223 1,395 -908 …654 Jazeera Airways Co. -2,805 -8,203 … 2,002 -6,728 …655 Al Sour 4,367 4,823 -10 1,326 1,541 -14656 Wataniya Airways 14,084 -10,897 … 22,336 -2,850 …657 Future Kid 247 456 -46 -431 -34 …658 KGL Logistics Company 7,492 … … 1,295 … …659 AL-Nawadi Holding Co. 1,025 … … 159 … …660 ALRAI MEDIA GROUP COMPANY K.S.C 2,212 … … -681 … …661 ZIMA Holding Company 211 … … … … …

Food701 Livestock Trading & Transport -205 6,662 … 1,175 312 277702 Danah Alsafat Foodstuff Company 2,270 3,416 -34 1,052 3,403 -69703 United Poultry 1,144 -34 … 473 -11 …704 Kuwait Food Co (Americana) 46,220 36,276 27 11,052 19,545 -44705 United Foodstuff Industries 210 … … -501 … …706 Kout Food Group 5,042 2,467 104 3,270 2,063 59

Non-Kuwaiti804 Sharjah Cement & Industrial Dev. 2,689 7,920 -66 554 -29 …805 Gulf Cement 5,638 2,810 101 298 -5,565 …806 Umm Al-Qaiwain Cement Industries 472 -4,346 … -385 -2,569 …807 Fujairah Cement Industries 406 6,188 -93 -701 -643 …808 Ras Al-Khaimah for White Cement … 5,458 … … 428 …809 Arab Insurance Group … 6,274 … … 1,418 …810 United Gulf Bank 11,222 5,770 95 -778 525 …811 Egypt Kuwait Holding 36,734 34,078 8 8,322 6,894 21812 Bahrain Kuwait Insurance 3,142 3,047 3 598 211 183813 Gulf Finance House … -207,733 … … -172,945 …814 Commercial International Bank … 89,220 … … 20,512 …817 Inovest -10,219 3,251 … -4,272 -1,653 …818 Ahli United Bank 76,145 57,871 32 18,148 4,779 280820 Ithmaar Bank -39,865 -62,393 … -42,814 -46,604 …


12

Kse ReBased peRFoRmaNCe

Value Weighted (LHS)

Mar.10 Apr.10 May.10 Jun.10 Jul.10 Aug.10 Sep.10 Oct.10 Nov.10 Dec.10 Jan.11 Feb.11 Mar.11

Price Index (RHS)

120

110

100

90

806100

6300

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31292723211715139731

March 2011

0

10

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Value of Traded Shares (left) KSE Index (right)

mill

ion

KD

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Kse daIly peRFoRmaNCe

Kuwait stock exchange

KSE continues to decline in the absence of any positivesFollowing the dramatic decline in February, the Kuwait Stock Exchange (KSE) suffered further losses in March. Continued unrest and escalating regional tensions weighed down on most MENA markets. While locally, market fundamentals didn’t help in reducing the impact of regional turmoil on the stock market. Politically, tensions related to local and regional issues led to the resignation of the government. A new government is awaited, and investors will want to gauge its impact, if any, on the execution of the current 5-year plan.

After the end of Q1, some companies are still delaying the announcement of their 2010 results and 32 were eventually halted from trading. Lastly, we note that after the failure of the Zain-Etisalat deal, the market seems to lack any real catalyst to counter the unfavorable environment.

Most market indicators were weak in March. The price weighted index fell 2.9%, to its lowest level since 2004. Value-weighted index also declined 3.2% on the month. Most sector indices were down on the month with “investment” being the worst performer while “non-Kuwaiti” companies fared the best. Trading activity recovered slightly in March but remained considerably weak and daily traded

volume averaged KD 31 million. The market shed another KD 2.5 billion of its capitalization in March.

Market participants suffered significant losses in the 1Q2011. Both market indices have dropped nearly 10% since the beginning of the year. Market capitalization lost almost KD 5 billion, or 13%, shedding most of its 2010 gains.

As concerns stemming from the regional unrest seem to have been priced in, focus is shifted back to local factors. The long awaited capital market authority by-laws were released as scheduled. And the development plan with all its implications on various sectors (banks, productive, consumer) of the economy is back in focus.

Kse peRFoRmaNCe By seCtoR, maRCH 2011

price- % Change in Kse Index market Cap. % of trading activity price to

Kse Index price-Weighted Value-Weighted (million KD) market (daily average) earnings +

31-Mar-11 Mar-11 YTD 10 Mar-11 YTD 10 31-Mar-11 31-Mar-11 mn shares mn KD 31-Mar-11

Banking 11479 -2.3 -3.5 -3.3 -6.6 13483 41.9% 20.2 12.3 23Investment 4116 -8.3 -15.3 -7.3 -15.7 2452 7.9% 44.8 3.4 …Insurance 2661 0.0 -1.3 -0.7 -0.4 323 1.0% 0.1 0.0 13Real Estate 2140 -1.0 -9.2 0.3 -11.3 1620 4.8% 39.4 3.2 …Industrial 4503 -6.8 -15.4 -7.3 -16.6 2364 7.6% 112.0 3.2 27Services 14156 -1.4 -7.6 -2.9 -11.3 9452 28.5% 43.4 8.7 7Food 4362 1.0 -6.0 3.3 -3.3 739 2.2% 1.0 2.0 12Non-Kuwaiti 6762 3.8 -7.1 0.8 -6.9 970 6.2% 2.8 0.4 6total market 6296 -2.9 -9.5 -3.2 -9.6 31402 100.0% 162.9 31.4 12Kuwaiti Companies 30432Source: Kuwait Stock Exchange and Zawya.

Note: * PE is calculated using market cap as of month close and 12 months trailing earnings.

Head Office

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www.nbk.com

International Network BahrainNational Bank of Kuwait SAKBahrain BranchSeef Tower, Al-Seef District 428P.O. Box 5290, ManamaBahrainTel: +973 17 583 333Fax: +973 17 587 111

National Bank of KuwaitBahrain Branch (H.O)GB Corp TowerBlock 346, Road 4626Building 1411P.O. Box 5290, ManamaKingdom of BahrainTel: +973 17 155 555Fax: +973 17 104 860

JordanNational Bank of Kuwait SAKAmman BranchShareef Abdul Hamid Sharaf StP.O. Box 941297Shmeisani, Amman 11194JordanTel: +962 6 560 8800Fax: +962 6 560 8811

Saudi ArabiaNational Bank of Kuwait SAKJeddah BranchAl-Andalus Street, Red Sea PlazaP.O. Box 15385Jeddah 21444, Saudi ArabiaTel: +966 2 653 8600Fax: +966 2 653 8653

LebanonNational Bank of Kuwait(Lebanon) SALBAC BuildingJustinian Street, SanayehP.O. Box 11-5727, Riyad El SolhBeirut 1107 2200, LebanonTel: +961 1 759700Fax: +961 1 747866

IraqCredit Bank of IraqStreet 9, Building 178Sadoon Street, District 102P.O. Box 3420Baghdad, IraqTel: +964 1 7182198/7191944 +964 1 7188406/7171673Fax: +964 1 7170156

EgyptAl Watany Bank of Egypt13 Al Themar StreetGameat Al Dowal AlArabiaFouad Mohie El Din SquareMohandessin, Giza, EgyptTel: +20 2 33388816/33388817Fax: +20 2 33379302

United Arab EmiratesNational Bank of Kuwait SAKDubai BranchSheikh Rashed RoadPort Saeed AreaACICO Business ParkP.O. Box 88867, Dubai UAETel: +971 4 292 9222Fax: +971 4 294 3337

United States of AmericaNational Bank of Kuwait SAKNew York Branch299 Park AvenueNew York, NY 10171USATel: +1 212 303 9800Fax: +1 212 319 8269 United KingdomNational Bank of Kuwait(International) PlcHead Office13 George StreetLondon W1U 3QJ, UKTel: +44 20 7224 2277Fax: +44 20 7224 2101

National Bank of Kuwait(International) PlcPortman Square Branch7 Portman SquareLondon W1H 6NA, UKTel: +44 20 7224 2277Fax: +44 20 7486 3877

FranceNational Bank of Kuwait(International) PlcParis Branch90 Avenue des Champs-Elysees75008 Paris, FranceTel: +33 1 5659 8600 Fax: +33 1 5659 8623

SingaporeNational Bank of Kuwait SAKSingapore Branch9 Raffles Place #51-01/02Republic PlazaSingapore 048619Tel: +65 6222 5348Fax: +65 6224 5438

VietnamNational Bank of Kuwait SAKVietnam Representative OfficeRoom 2006, Sun Wah Tower115 Nguyen Hue Blvd, District 1Ho Chi Minh CityVietnamTel: +84 8 3827 8008Fax: +84 8 3827 8009

ChinaNational Bank of Kuwait SAKShanghai Representative OfficeSuite 1003, 10th Floor, Azia Center1233 Lujiazui Ring RoadShanghai 200120ChinaTel: +86 21 6888 1092Fax: +86 21 5047 1011

NBK Capital

Kuwait NBK Capital 38th Floor, Arraya II BuildingShuhada’a Street, SharqP.O. Box 4950, Safat 13050KuwaitTel: +965 2224 6900Fax: +965 2224 6904 United Arab EmiratesNBK Capital Limited Precinct Building 3, Office 404Dubai International Financial CenterP.O. Box 506506, DubaiUnited Arab EmiratesTel: +971 4 365 2800Fax: +971 4 365 2805

TurkeyNBK CapitalArastima ve Musavirlik ASSUN Plaza, 30th FloorDereboyu Sk. No.24Maslak 34398, Istanbul, TurkeyTel: +90 212 276 5400Fax: +90 212 276 5401

Associates

QatarInternational Bank of Qatar (QSC)Suhaim bin Hamad StreetP.O. Box 2001Doha, QatarTel: +974 4447 3700Fax: +974 4447 3710

TurkeyTurkish BankValikonagl CAD. 7Nisantasi 34371,Istanbul, TurkeyTel: +90 212 373 6373Fax: +90 212 225 0353

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While every care has been taken in preparing this publication, National Bank of Kuwait accepts no liability whatsoever for any direct or consequential losses arising from its use. Economic Brief is distributed on a complimentary and discretionary basis to NBK clients and associates. This report and previous issues can be found in the “Reports” section of the National Bank of Kuwait’s web site. Please visit our web site, www.nbk.com, for other bank publications. For further information please contact NBK Economic Research at:Tel: (965) 2259 5500Fax: (965) 2224 6973Email: [email protected]

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