KAMCO Research. GCC Equity Markets Review. April-2012 Issue

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1 April-2012 Issue Following a strong performance during the First Quarter of 2012, GCC Equity Markets lost ground during the month of April and closed on a mixed note affected by the renewed financial stress in Spain that triggered a negative sentiment in international financial markets. Alleviated supply-side crude oil pressures which pushed prices down also contributed to the retreat in most of the GCC equity markets. Following a gain of USD 88.6 bn in its combined market capitalization during Q1-2012, the 7 GCC Equity Markets lost together USD 17.7 billion of their market capitalization during April 2012 to record USD 788 billion. Saudi TADAWUL weighed down on market cap losing alone around USD 15.5 billion while Kuwait Stock Exchange lost around USD 1.3 billion of its market cap. The ongoing concerns regarding debt sustainability in Europe, further possible downgrading in Spain s sovereign credit rating (negative outlook) and the concerns about the damage that might be caused to the global economy as a result of a possible Greece exit from the Euro-zone along with the volatility in oil prices and financial markets and the soft landing of the Chinese economy are all factors that will most likely continue to shape GCC equity markets performance during the second quarter. After healthy gains recorded during Q1-12 that was fuelled by ample liquidity and positive progress in issuing new laws that will most likely open up the Saudi stock market to foreign investors, the Saudi Tadawul consolidated during the month triggered by the disappointing Q financial results of the heavy weighted petrochemical stocks which dropped by 13% during Q to SAR 8.2 billion down from SAR 9.4 billion during Q Saudi TADAWUL All Share Index (TASI) was the worst performer amongst its GCC Peers during April, ending the month down 3.53% to 7, driven by negative developments in the international markets along with drop in oil prices and the sell off witnessed on the petrochemical stocks. Robust Q-12 earnings announced by Qatari companies along with the new sectors classification that took place during April failed to reverse the downside trend in Qatar Exchange. However the Qatari market has been showing resilience on the downside since the beginning of the year. QE market capitalization slightly dropped by 0.1% to USD billion while QE 20 Index dropped 1% to record 8, at the end of the month. Since the beginning of the year, Qatar Exchange performance was slightly down by 0.86% despite the favourable business environment fuelled by government massive spending on developing infrastructure and real estate projects and the solid public finance. Total value traded on the 7 GCC bourses during April 2012 recorded around USD 79.5 bn; the Saudi TADAWUL remains the engine of trading in the GCC stock markets representing 91% of aggregate traded value while the Kuwaiti bourse was lagging behind at a total value of USD 2.86 bn. Liquidity in the UAE stock markets remains tight with only USD 2.3 billion traded in April while trading improved in Qatar Exchange to record USD 1.97 billion during the month. KAMCO Investment Research Department M2, Al-Shaheed Tower, Khalid Bin Al-Waleed Street- Sharq,P.O. BOX : 28873, Safat 13149, Kuwait Tel : +(965) , Fax : +(965) Kamcoird@kamconline.com Website:

2 Table of Contents Pages GCC Equity Markets Overview Saudi Stock Exchange Kuwait Stock Exchange Abu Dhabi Securities Exchange Dubai Financial Market Qatar Exchange Bahrain Bourse Muscat Securities Market Appendices

3 GCC Equity Markets Overview GCC Equity Markets Benchmark Return & Volatility Closing Return Volatility Value April-12 YTD-12 April-12 YTD-12 Tadawul All Share Index 7, (3.53%) 17.77% 18.40% 12.37% KAMCO KSE TRW Index 2, (0.30%) 2.34% 5.84% 4.97% KSE Weighted Index (0.65%) 2.92% 8.60% 7.10% ADX General Index 2, (1.93%) 4.23% 5.11% 10.39% DFM General Index 1, (1.09%) 20.51% 15.17% 22.85% QE 20 Index 8, (0.99%) (0.86%) 5.88% 8.07% Bahrain All Share Index 1, % 0.80% 4.40% 5.63% MSM 30 Index 5, % 3.05% 9.73% 8.01% Following a strong performance during the First Quarter of 2012, GCC Equity Markets lost ground during the month of April and closed on a mixed note affected by the renewed financial stress in Spain that triggered a negative sentiment in international financial markets. Alleviated supply-side crude oil pressures which pushed prices down also contributed to the retreat in most of the GCC equity markets. Following a gain of USD 88.6 bn in its combined market capitalization during Q1-2012, the 7 GCC Equity Markets lost together USD 17.7 billion of their market capitalization during April 2012 to record USD 788 billion. Saudi TADAWUL weighed down on market cap losing alone around USD 15.5 billion while Kuwait Stock Exchange lost around USD 1.3 billion of its market cap. The ongoing concerns regarding debt sustainability in Europe, further possible downgrading in Spain s sovereign credit rating (negative outlook) and the concerns about the damage that might be caused to the global economy as a result of a possible Greece exit from the Euro-zone along with the volatility in oil prices and financial markets and the soft landing of the Chinese economy are all factors that will most likely continue to shape GCC equity markets performance during the second quarter. After healthy gains recorded during Q1-12 that was fuelled by ample liquidity and positive progress in issuing new laws that will most likely open up the Saudi stock market to foreign investors, the Saudi Tadawul consolidated during the month triggered by the disappointing Q financial results of the heavy weighted petrochemical stocks which dropped by 13% during Q to SAR 8.2 billion down from SAR 9.4 billion during Q Saudi TADAWUL All Share Index (TASI) was the worst performer amongst its GCC Peers during April, ending the month down 3.53% to 7, driven by negative developments in the international markets along with drop in oil prices and the sell off witnessed on the petrochemical stocks. Robust Q-12 earnings announced by Qatari companies along with the new sectors classification that took place during April failed to reverse the downside trend in Qatar Exchange. However the Qatari market has been showing resilience on the downside since the beginning of the year. QE market capitalization slightly dropped by 0.1% to USD billion while QE 20 Index dropped 1% to record 8, at the end of the month. Since the beginning of the year, Qatar Exchange performance was slightly down by 0.86% despite the favourable business environment fuelled by government massive spending on developing infrastructure and real estate projects and the solid public finance. 1

4 Total value traded on the 7 GCC bourses during April 2012 recorded around USD 79.5 bn; the Saudi TADAWUL remains the engine of trading in the GCC stock markets representing 91% of aggregate traded value while the Kuwaiti bourse was lagging behind at a total value of USD 2.86 bn. Liquidity in the UAE stock markets remains tight with only USD 2.3 billion traded in April while trading improved in Qatar Exchange to record USD 1.97 billion. Market Capitalization of the GCC Equity Markets as of Market Cap at the end of 30-April-2012 (USD Bln) TADAWUL QE KSE ADX DFM MSM BHB Market Capitalization by Country # of Listed Stocks Market Cap (Mln USD) as of: 31-Mar Apr-12 M-T-M % Chg % of Total Saudi Stock Exchange , ,234 (3.79%) 50.01% Kuwait Stock Exchange , ,848 (1.22%) 13.55% Abu Dhabi Securities Exchange 66 75,808 75,042 (1.01%) 9.52% Dubai Financial Market 65 51,618 51,091 (1.02%) 6.48% Qatar Exchange , ,160 (0.06%) 16.13% Bahrain Bourse 41 16,700 16, % 2.12% Muscat Securities Market 61 16,751 17, % 2.19% Total GCC Equity Markets , ,325 (2.20%) % Trading Activity Indicators (April-12) Traded Volume Traded Value Trades Mln Shares % of Total Mln USD % of Total 000 Saudi Stock Exchange 12, % 72, % 5,144 Kuwait Stock Exchange 8, % 2, % 104 Abu Dhabi Securities Exchange 1, % % 23 Dubai Financial Market 4, % 1, % 81 Qatar Exchange % 1, % 87 Bahrain Bourse % % 1 Muscat Securities Market % % 44 Total GCC Equity Markets 28, % 79, % 5,484 2

5 In Saudi Arabia, despite strong Q1-12 earnings and bright prospects for the banking sector according to Fitch Ratings, profit booking and a crackdown issued by the Saudi King on market manipulation weighed on the TASI performance to end on a negative note and snap a 4 month winning streak. As a result, the TASI failed to maintain the bullish momentum that pushed the index to a new 42 month high during the beginning of the month and ended April down points, or 3.53%, to close at 7, points and end as the worst performing market in the GCC region and narrowing its YTD-12 gains to 17.77% from 22% witnessed in Q1-12. In April, TADAWUL market capitalization lost 3.8% of its value to SAR 1.48 trillion (USD 394 bn) as compared to SAR 1.54 trillion (USD 410 bn) recorded in March-12, pressured by market heavyweight Petrochemical Industries sector, which represents 34% of the aggregate market cap, slumping 5.4% to SAR 504 bn (USD bn); and Banks & Financial sector falling 4.9% to SAR 360 bn (USD 96 bn). While in Kuwait, After rising for the last six sessions in April, the Kuwaiti Bourse was able to end the month on a positive note to reach a 10 month high. Although, the KSE Weighted and KAMCO TRW Indexes registered losses during April falling 0.65% and 0.3% to close at and 2, points, respectively; the KSE Price Index ended the month as the best performer in the GCC helping push the Index s YTD-12 gain higher to 9.54%. Local retail investors picking up mid- and small-cap stocks pushed the KSE Price Index higher to 6,368.6 points. As for Abu Dhabi, Following healthy gains in February 2012, Abu Dhabi Securities Exchange retreated in April and continued the downtrend that started in March on the back of invisibility in corporate earnings and the ongoing global uncertainty emanating from the sovereign debt crisis in Greece and Spain. Profit taking before the announcement of Q financial results also pressured the market and extended the ADX General Index losses in April to 1.93%, thus narrowing its gains over the first 4 months of the year to 4.2%. In Dubai, Selling pressure on small cap stocks coupled with poor Q1-12 corporate earnings from listed companies dragged the Dubai Financial Market (DFM) General Index lower by 1.1% to 1,631 points at the end of April compared to 1,648.9 points at the end of March-12. All sectors in the market ended in the red with the exception of the Real Estate & Construction sector as aggregate market capitalization lost 1.02% of its value to reach AED bn in April-12 down from AED bn in March-12. Heavyweight banking sector fell 4.02% to AED 50.3 bn from AED 52.4 bn during the same period. Investors remained on the sidelines this month as was evident in trading indicators with volume traded slumping 40.2% to 4.7 bn shares from a previous 7.9 bn while value traded fell 29.5% to AED 6.7 bn down from AED 9.6 bn in March-12. In Qatar, The QE 20 Index reversed its two month positive trend to drop 0.99% to 8, and reversing its YTD-12 return to a loss of 0.86%. The sell-off coincided with a surge in trading indicators with volume increasing 25% to mn shares from mn while value increasing 12% to QAR 7.2 bn (USD 1.97 bn). Aggregate market capitalization increased 0.12% during the month to QAR bn (USD bn) as compared to last month s market capitalization of QAR bn. The month was marked by a change in the market s sector distribution as the exchange followed on the heels of last month s announcement of new indices with the establishment of new sectors. Whereas in Bahrain, the lack of positive market catalysts along with thin trading during April pushed the index to end the month with a marginal gain of 0.03% closing at 1, Renewed local tension and absence of large institutional investors continue to weigh down on sentiment as trading activity is still significantly low as the value of shares traded during April dropped by 66% to BHD 3.54 mn in comparison with BHD mn in March, reflecting the scarcity of international and institutional investors in the market. Moreover, the number of 3

6 shares exchanging hands during the month also dropped by 57% to mn shares in comparison with March s 55.9 mn shares. Finally in Oman, fuelled by strong Q1-12 corporate earnings coupled with bright prospects for the economy, the Omani Bourse was able to reverse last month s fall to recover losses and end as the second best performing market in April, following Kuwait. By the end of the month, the MSM 30 Index gained 3.14% to close at 5, points with volatility slightly easing to 9.7% from 10% during April. The MSM 30 Index recovered Q1-12 losses to post a 3.05% gain in YTD-12. Corresponding to the increase witnessed, trading indicators rose with volume increasing 36.5% during the month to 593 mn shares compared to 434 mn in March-12, while value traded was up 14% to OMR 123 mn versus OMR 108 mn in the previous month. P/E Multiples (April-12) P/B & Dividend Yield (April-12) P/E (X) DFM KSE Tadawul Avg. GCC ADX MSM QE BHB P/B (X) Yield % 4.4% 3.5% 3.4% 3.6% 3.1% 2.9% 2.6% GCC SSE KSE ADX DFM QE BB MSM 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 4

7 Saudi Stock Exchange Benchmark Return Closing Value April-12 Point (%) 60 Day (%) 90 Day (%) YTD-12 (%) Tadawul All Share Index 7, (276.68) (3.53%) 4.59% 14.07% 17.77% Market Review Despite strong Q1-12 earnings and bright prospects for the banking sector according to Fitch Ratings, profit booking and a crackdown issued by the Saudi King on market manipulation weighed on the TASI performance to end on a negative note and snap a 4 month winning streak. As a result, the TASI failed to maintain the bullish momentum that pushed the index to a new 42 month high during the beginning of the month and ended April down points, or 3.53%, to close at 7, points and end as the worst performing market in the GCC and narrowing its YTD-12 gains to 17.77% from 22.09% witnessed in Q1-12. In April, TADAWUL market capitalization lost 3.8% of its value to SAR 1.48 trillion (USD 394 bn) as compared to SAR 1.54 trillion (USD 410 bn) recorded in March-12, pressured by market heavyweight Petrochemical Industries sector, which represents 34% of the aggregate market cap, slumping 5.4% to SAR 504 bn (USD bn); and Banks & Financial sector falling 4.9% to SAR 360 bn (USD 96 bn). Trading indicators diminished during the month with volume and value traded both falling 15.4%. During April, the total traded volume reached 12.7 bn shares distributed over 5.1 mn transactions while value traded decreased to SAR 270 bn, down from SAR 319 bn in the previous month. As the month began, the TASI extended March s rally to record gains during the first three sessions of April on the back of higher sentiment from positive earnings in the cement industry which pushed the index higher to a fresh 42 month high on April 3, nearing the 8,000 mark and close at 7, points. Nevertheless, investors seized the opportunity to book profits on blue chips, halting the rally and resulting in a new downtrend as they also took cues from global markets. Perhaps one of the major drivers for the selling spree witnessed in April was the fact that investors cut positions ahead of an expected crackdown against market manipulation. King Abdullah has ordered the crackdown, insisting action should be taken if necessary against improper trading. As a result, the TASI was still pressured to the downside amid selling pressures from investors to book profits in banking stocks after banks posted strong Q1-12 earnings. Alongside the banking sector which negatively pressured the performance of the market in April, market heavy-weight petrochemicals sector also played a key role for the sharp fall. Petrochemical stocks weighed on performance on the back of oil prices falling during the month after data showed that first-quarter economic growth in China, the world's second largest oil consumer, was the weakest in nearly three years, reinforcing concerns about slowing demand for petroleum. On April 15, the TASI recorded its largest decline in eight months following heavy losses in blue chip stocks as traders book gains from this year's surge following disappointing earnings from petrochemical producers. Investors blamed petrochemical producers earnings falling short of expectations due to a lack of transparency from the companies that made it difficult for analysts to make estimates and also due to weaker-than-anticipated global demand for petrochemical products. In Q1-12, aggregate corporate earnings registered a 17.1% increase to SAR 24.6 bn up from SAR 21 bn in Q1-11 on the back of a 22.5% rise in banking earnings to SAR 7.7 bn from SAR 6.3 bn in Q1-11 and a 62.3% increase in the Telecom and IT sector to reach SAR 4.1 bn in Q1-12 up from SAR 2.5 bn in Q1-11. On the other hand, market heavyweight petrochemical sector witnessed a 12.8% drop in earnings to SAR 8.2 bn from SAR 9.4 bn in Q1-11. In the banking sector, the 5

8 positive earnings were supported by Al Rajhi Bank posting a 18.3% increase in earnings to reach SAR 2 bn from SAR 1.7 bn in Q1-11 while Samba Financial Group witnessed its earnings grow 2% to SAR 1.15 bn from SAR 1.12 bn. In the petrochemical sector, Saudi Basic Industries Corp. (SABIC), the world s biggest petrochemicals maker, said Q1-12 profit dropped 5.5% on the back of lower prices for its products and higher feedstock costs. Net income fell to SAR 7.27 bn from SAR 7.69 bn a year earlier. SABIC stated that net income from the year-earlier period declined as a result of lower prices for some products and an increase in some of our feedstock. It was a result of the general state of the economy worldwide. There was a deliberate slowdown in growth to quell inflation in China. The state of the European situation affected that. In the telecom sector, heavyweight Saudi Telecom posted a 60% increase in earnings during Q1-12 to SAR 2.5 bn up from SAR 1.6 bn in Q1-11. During the month, Fitch Ratings released a report stating that Saudi Arabian banks have plenty of scope to fund loan growth in 2012 as the sector relaxes the cautious approach to lending that has dominated in the last few years. This growth is likely to be at a reasonable pace and therefore should not hurt asset quality or banks viability ratings, said a statement from the rating agency. It pointed out that rising deposits and several years of subdued loan growth had allowed Saudi banks to build up substantial surplus liquidity in the form of government securities and deposits with the Saudi Arabian Monetary Agency (SAMA). Funding is a key strength for Saudi banks, where deposits constitute around 89% of non-equity funding at Fitch-rated banks. However, sector deposits are concentrated on either direct government deposits or deposits from governmentrelated corporates, according to Fitch Ratings. Retail deposits do form the majority of funding at some banks and are a positive in the sector because of the country s high savings rate. Capital levels are generally good and can support loan growth, despite relatively high dividend payouts. On the economic front, according to the Central Department of Statistics and Information, Saudi Arabia s gross domestic product (GDP) grew 6.64% from a year earlier in Q4-11, accelerating from a 5.1% growth in Q3-11. The oil sector, which accounts for nearly a third of the economy, expanded 6.13% to reach SAR billion in Q4-11. The report said private sector growth, at 9.9%, outpaced the state sector s 3.6% expansion. Private sector GDP amounted to SAR billion in Q4-11 compared to SAR billion in The construction sector expanded 13.3% because of a real estate boom and heavy government spending on infrastructure. Regarding inflation, Saudi Arabia s annual rate of inflation held steady at 5.4% in March-12 compared with February, a sign that the higher food and rent prices could be inflationary, data from the Central Department of Statistics and Information showed. Rent, fuel and housing related services saw an 8.9% rise in March from a year earlier, compared with a 9.3% jump in February; while food and beverage prices gained 5.1% on year versus a 4.3% rise in the previous month. Over the month, rent, fuel and housing related services inched up 0.5%, food and beverage prices gained 0.7% from February. The Saudi Arabian Monetary Agency (SAMA) has said that inflationary pressures, caused mainly by an increase in global food prices, are worrying, but the central bank sees no need to change interest-rate policy. 6

9 TASI 52 Week Performance Relative to Volume 8,050 7,900 7,750 7,600 7,450 7,300 7,150 7,000 6,850 6,700 6,550 6,400 6,250 6,100 5,950 5,800 1,100 1, TASI Value Vol. Traded (shr. mil.) Regarding corporate news, Al Rajhi Bank, the world s largest Islamic lender, is turning to the ringgit-denominated debt market for its debut sukuk sale to fund the opening of new branches in Malaysia. The bank is considering the issuance as it plans a 20% increase in annual profits in the Southeast Asian nation by adding to 23 existing outlets. The bank, which has never sold debt since it was founded 60 years ago, will also expand underwriting. Also, Saudi Electricity Company (SEC) successfully closed USD 1.75 billion international Sukuk. The transaction led by Deutsche Bank and HSBC is the inaugural international Sukuk issuance by SEC and the largest international debt capital markets issuance from Saudi Arabia. The deal was concluded after a comprehensive roadshow covering key centres in Asia, the Middle East and Europe. The dual-tranche Sukuk transaction was extremely well received globally and generated a large order book with over 440 investors placing orders in excess of USD 1.75bn. Finally, Banque Saudi Fransi has established a USD 2 billion Islamic bond (sukuk) program, a regulatory filing on the London Stock Exchange showed with Citigroup, Credit Agricole, Deutsche Bank and Saudi Fransi Capital arrangers and dealers on the program. In other news, Saudi Basic Industries Corp. (SABIC) announced a USD 100 million investment to build 60,000 square meter new Technology Center in China. The center will house some 400 employees who will relocate to this new facility when completed next year. In addition to commercial and corporate function staff, there is a Research & Development team of over 200 scientists and engineers who will focus on advanced engineering plastics materials that can be used in a broad array of industries from automotive, personal electronics, IT, alternative energy, building and constructions to infrastructures. Furthermore, Saudi Electricity Company (SEC) is currently implementing new power generation and distribution projects at a total cost of more than SA R100 billion. SEC has set out a 10-year plan ( ) during which it would implement new projects worth SAR 452 billion to meet the increasing electricity demand as a result of the Kingdom s rapid economic growth. The company hopes the new plan would enable it to have a 10% reserve at peak times. 7

10 TADAWUL Most Active Stocks for the Month Volume Value Close (000 shares) (000 SAR) (SAR) Alinma Bank 1,671,514 25,722, ZAIN KSA 1,607,812 15,680, Dar Al Arkan Real Estate Development Co. 1,239,146 15,034, Emaar The Economic City 948,295 12,410, Etihad Atheeb Telecommunication Co. 640,237 12,275, Best Return Performers Worst Return Performers Close M-T-M Close M-T-M (SAR) % Chg (SAR) % Chg Nama Chemicals % Saudi Industrial Development Co (30.10%) ACE Arabia Coop. Insurance Co % Al Khaleej Training & Education Co (28.12%) Saudi Cement Co % Saudi Enaya Coop. Insurance Co (27.61%) Knowledge Economic City % National Industrialization Co (25.77%) Jabal Omar Development Company % Banque Saudi Fransi (22.58%) Sectors Performance (TADAWUL) Monthly Trading Indicators Valuation Multiples Market Cap M-T-M Volume Value P/E P/B Yield Sectors (Mn SAR) % Chg (Mn Shares) (Mn SAR) (X) (X) (%) Banks & Financial 360,125 (4.92%) 1, , % Petrochemical Industries 504,355 (5.40%) 1, , % Cement 71, % , % Retail 26, % , % Energy & Utilities 58,777 (14.21%) , % Agriculture & Food Industries 59,934 (0.08%) , % Telecommunication & I.T. 152, % 2, , % Insurance 33,401 (7.25%) ,394.9 NM % Multi-Investment 51,763 (3.75%) , % Industrial Investment 52,772 (5.92%) , % Building & Construction 23,520 (7.79%) ,493.6 NM % Real Estate Development 67, % 2, , % Transport 9,855 (1.11%) , % Media & Publishing 4, % , % Hotel & Tourism 3,082 (7.09%) , % Total Saudi Market 1,480,999 (3.78%) 12, , % 8

11 Kuwait Stock Exchange Benchmarks Return Closing Value April-12 Point (%) 60 Day (%) 90 Day (%) YTD-12 (%) KSE Price Index 6, % 3.94% 8.72% 9.54% KSE Weighted Index (2.74) (0.65%) 1.97% 2.88% 2.92% KAMCO TRW Index 2, (8.01) (0.30%) 1.66% 2.24% 2.34% Market Review After rising for the last six sessions in April, the Kuwaiti Bourse was able to end the month on a positive note to reach a 10 month high. Although, the KSE Weighted and KAMCO TRW Indexes registered losses during April falling 0.65% and 0.3% to close at and 2, points, respectively; the KSE Price Index ended the month as the best performer in the GCC helping push the Index s YTD-12 gain higher to 9.54%. Local retail investors picking up mid- and small-cap stocks pushed the KSE Price Index higher to 6,368.6 points. Trading indicators ended to the downside as volume traded fell 15.1% to 8.7 bn shares from 10.3 bn in March-12 while value traded lost 16.7% to KWD 780 mn in April-12 from KWD 937 mn in March-12. Despite the market ending mixed during April, the market breadth skewed towards the gainers, with an advancer-todecliner ratio of 75-to-72, while 55 stocks remained unchanged from last month. In a highly awaited move, Kuwait s bourse stated that the bourse will launch a new trading system on May 13, backed by The Nasdaq OMX Group Inc to help trading of financial instruments such as derivatives and Islamic bonds. The new "X-stream" trading system will help modernise the exchange which is planning an initial public offering, officials said. In addition, officials said the new platform would enable the trade of products such as international futures, options, exchangetraded funds, fixed income and sukuks. It will also allow trades of as little as one share at a time, the exchange said in a statement. The new platform will scrap the lots system, allowing investors to trade as little as one share at a time rather than being forced to make bulk orders and levelling the field, the official said. It will also adopt an auction for closing prices. Investors will be able to place orders for up to 90 days in the future rather than requiring trades to be executed on the same day. The new system will open up the exchange for greater trade capacity hoping the platform would enliven trade. During the month, Moody s Investors Service stated that Kuwait s banking system remains stable, reflecting a gradual recovery in the banks profitability and a supportive operating environment, characterized by high government spending. Over the month outlook period, Moody s also expects that system liquidity will remain solid underpinned by ready access to deposits of cashrich government-related corporations/agencies. Over the outlook period, the government will likely record high fiscal surpluses on the back of high oil revenues, which will sustain its capacity to provide fiscal stimulus to the non-oil private-sector economy. Moody s estimates that real gross domestic product (GDP) will increase to around 5.5% in 2012 from 5.3% in Furthermore, Moody s expects that the banks reported asset-quality metrics will likely remain close to year-end 2011 levels with NPL levels at around 6%. Despite ongoing progress, Moody s believes there are downside risks to the system s asset quality, stemming from high industry and single-party exposures, and a lack of transparency regarding restructured loan levels. However, the rating agency notes that sector s strong capitalization provides the banks with substantial loss-absorption buffers. On the corporate front, Burgan Bank entered an agreement to acquire a 99.26% stake in Eurobank Tekfen, the Turkish arm of Eurobank EFG in a KWD 99 million (USD 355 million) deal. Burgan Bank will also absorb USD 280 million of loans issued by EFG to the Turkish unit as part of the deal. Furthermore, Burgan Bank announced that the bank s corporate banking group has successfully completed a finance deal with United Arab Shipping Company (UASC), the largest 9

12 shipping company in the Middle East. The USD 150 million loan will be used for financing the capacity expansion undertaken by UASC through the acquisition of nine A13 class container ships. In other news, Al-Argan International Real Estate Company announced the issuance of KWD 26.5 million worth of bond. The bonds have been rated BBB by the ratings agency Capital Intelligence and have a maturity period of five years issued in two tranches; the first tranche is worth KWD 23.2 million with a fixed interest rate of 6.25% annually while the second tranche is worth KWD 3.3 million with a floating rate of 3.5% annually above the Central Bank of Kuwait discount rate with a cap of 7%. KAMCO TRW Index 52-Week Performance Relative to Volume 2,900 2,850 2,800 2,750 2,700 2,650 2,600 2,550 2,500 1,200 1,125 1, KAMCO TRW Index Value Vol. Traded (shr. mil.) On the economic front, Kuwait s current account surplus surged 78% in 2011 on the back of a jump in exports. The current account booked a surplus of KWD billion in 2011, or 54.8% of gross domestic product (GDP) compared to KWD billion, or 30.8% of GDP. Regarding inflation, Kuwait s annual inflation edged up to a four month high of 4.1% in March as food costs surged in their fastest monthly pace in over a year fuelled by more expensive food globally and domestic strikes. Food costs, which account for almost one fifth of Kuwait consumer expenses, soared by 2.6% on a monthly basis in March, marking the quickest advance in 15 months, up from a mere 0.1% increase in February. Regarding Q1-12 earnings, 26 companies out of 202 announced their results where aggregate earnings excluding the Non-Kuwaiti Sector fell 53.1% to KWD mn from KWD mn; however, adjusting for the one time gains recorded by NMTC, aggregate earnings increased 2.7% from KWD mn. The majority of the banking sector announced their earnings with the exception of Commercial Bank of Kuwait, where aggregate earnings were down 0.8% to KWD mn from KWD 155 mn on the back of a 30% and 25% slump in Al Ahli Bank of Kuwait and Gulf Bank s earnings. National Bank of Kuwait witnessed its earnings increase a marginal 0.3% to KWD 81 mn from KWD 80.8 mn. The bank s strong financial position and its ability to focus on core banking operations in and outside Kuwait, coupled with the strengthening of Bouban Bank s market position and profitability continued to support NBK. NBK s net operating income continued to improve in Q1-12 to reach KWD mn. Burgan Bank witnessed a whopping 48% growth in its earnings to KWD 17.5 mn in Q1-12 from KWD 11.8 mn in Q1-11. Revenues grew 10% to KWD 10

13 42.6 mn from KWD 38.8 mn while operating profit grew 15% to KWD 26.6 mn compared to KWD 23 mn in Q1-11. As for Kuwait Finance House (KFH), the country s biggest Islamic lender reported an 11.5% decrease in Q1-12 net profit to fall to KWD 20 mn from KWD In the Industrial sector, earnings jumped 235.4% to KWD 7.3 mn from KWD 2.2 mn in Q1-11, on the back of United Industries Company more than doubling its earnings in Q1-12 to KWD 2.7 mn coupled with Portland Cement s ability to return to profit and post KWD 2.3 mn in net income. KSE Most Active Stocks for the Month Volume Value Close (000 shares) (000 KWD) (KWD) Abyaar Real Estate Development Co. 747,920 33, National Ranges Co. 730,720 15, Gulf Finance House 637,760 37, Hits Telecom Holding Co. 503,500 53, Investors Holding Group Co. 477,200 8, Best Return Performers Worst Return Performers Close (KWD) M-T-M % Chg Close (KWD) M-T-M % Chg Ithmaar Bank % United Gulf Bank (20.75%) Al Dar National Real Estate Co % Alimtiaz Investment Co (17.19%) Equipment Holding Co % Warba Insurance Co (14.86%) Investors Holding Group Co % Hits Telecom Holding Co (12.96%) Hayat Communications Co % Pearl of Kuwait Real Estate Co (12.31%) 11

14 KSE Sectors Performance Monthly Trading Indicators Valuation Multiples Market Cap M-T-M Volume Value P/E P/B Yield (000 KWD) % Chg (000 shares) (000 KWD) (X) (X) (%) Banking 12,799,890 (1.56%) 236, , % Investment 2,231, % 1,536, ,819 NM % Insurance 300,766 (4.14%) % Real Estate 2,053, % 2,882, ,639 NM % Industrial 2,187,737 (1.19%) 239,985 47, % Services 7,209,222 (2.11%) 2,440, , % Food 682,611 (4.80%) 37,428 6, % Non-Kuwaiti 1,682,598 (0.65%) 1,366,380 75, % Total Market 29,148,142 (1.24%) 8,739, , % 12

15 Abu Dhabi Securities Exchange Benchmark Return Closing Value April-12 Point (%) 60 Day (%) 90 Day (%) YTD-12 (%) ADX General Index 2, (49.18) (1.93%) (4.58%) 2.03% 4.23% Market Review Following healthy gains in February 2012, Abu Dhabi Securities Exchange retreated in April and continued the downtrend that started in March on the back of invisibility in corporate earnings and the ongoing global uncertainty emanating from the sovereign debt crisis in Greece and Spain. Profit taking before the announcement of Q financial results also pressured the market and extended the ADX General Index losses in April to 1.93%, thus narrowing its gains over the first 4 months of the year to 4.2%. Abu Dhabi Securities Exchange lost around AED 2.8 billion of its market capitalization to record AED billion at the end of April; heavy market losses incurred by First Gulf Bank and Emirates Telecom which shed AED 2.2 billon and AED 1.7 billion weighed down on the market; also Abu Dhabi National Energy (TAQA) contributed to the losses with its market value shedding AED 747 million to record AED 7.53 billion. ADX General Index 52 Week Performance Relative to Volume 2, , , ,650 2,600 2,550 2,500 2, , , , ADX General Index Value Vol. Traded (shr. mil.) 13

16 Most Active Stocks for the Month Volume Value Close (000 shares) (000 AED) (AED) AL DAR Properties Co. 334, , Sorouh Real Estate Co. 241, , DANA GAS 137,131 65, Ras Al Khaimah Cement Co. 101,542 76, Ras Al Khaimah Properties 92,667 37, Best Return Performers Worst Return Performers Close (AED) M-T-M % Chg Close (AED) M-T-M % Chg National Corp for Tourism & Hotels % Al Wathba National Insurance Co (18.58%) International Fish Farming Co % Green Crescent Insurance Co (16.22%) Insurance House P.S.C % Waha Capital Co (12.86%) Al Khazna Insurance Co % National Marine Dredging Co (12.33%) FOODCO Holding Company % Gulf Cement Co (11.50%) Sectors Performance Monthly Trading Indicators Valuation Multiples Market Cap M-T-M Volume Value P/E P/B Div. Yield (Mln AED) % Chg (000 Shares) (000 AED) (X) (X) (%) Banks 123,114 (0.86%) 75, , % Investment & Financial Services 1,247 (12.04%) 33,617 22, % Real Estate 8,999 (4.48%) 721, ,402 NM % Energy 10,502 (8.78%) 153,313 87, % Consumer Staples 3, % 3,228 6, % Industrial 9,442 (1.45%) 138, , % Insurance 9,966 (1.02%) 64,486 56, % Telecommunication 100,846 (0.49%) 36, , % Services 8, % 1,096 3, % Total Market 275,614 (1.01%) 1,228,316 1,670, % 14

17 Dubai Financial Market Benchmark Return Closing Value April-12 Point (%) 60 Day (%) 90 Day (%) YTD-12 (%) DFM General Index 1, (17.92) (1.09%) (4.18%) 13.60% 20.51% Market Review Selling pressure on small cap stocks coupled with poor Q1-12 corporate earnings from listed companies dragged the Dubai Financial Market (DFM) General Index lower by 1.1% to 1,631 points at the end of April compared to 1,648.9 points at the end of March-12. All sectors in the market ended in the red with the exception of the Real Estate & Construction sector as aggregate market capitalization lost 1.02% to reach AED bn in April-12 down from AED bn in March-12. Heavyweight banking sector fell 4.02% to AED 50.3 bn from AED 52.4 bn over the same period. Investors remained on the sidelines in April as was evident in trading indicators with volume traded slumping 40.2% to 4.7 bn shares from a previous 7.9 bn while value traded fell 29.5% to AED 6.7 bn from AED 9.6 bn in March-12. The real estate & construction sector was the only gainer this month mainly on the positive earnings reported by Emaar Properties marked by the increased sales of properties in Dubai, delivery of homes in Egypt and strong recurring revenues from the shopping malls and hospitality businesses. Investors bet that Emaar would post strong Q1-12 earnings and the developer met expectations. The company recorded a whopping 44% increase in net profit to reach AED 606 mn during Q1-12 up from compared to AED 421 mn for the same period of Emaar recorded revenues of AED1.8 bn for Q1-12 with shopping malls & retail businesses contributing AED 651 mn and hospitality & leisure businesses contributing AED 403 mn. The revenues from business segments of malls and hospitality in Q1-12 increased by 25% as compared to same period in 2011 and accounted for 58% of the company's total revenue. DFM General Index 52 Week Performance Relative to Volume DFM General Index Value 1,800 1,750 1,700 1,650 1,600 1,550 1,500 1,450 1,400 1,350 1, Vol. Traded (shr. mil.)

18 On the economic front, Dubai s budget deficit narrowed sharply to AED 3.7 bn in 2011, helped by higher oil revenues and lower spending on development projects, a sovereign bond prospectus produced by the emirate shows. Government expenditures for the Emirate edged up slightly to AED 36 bn last year compared with 2010 and came above an initial 33.7 bn plan, the prospectus for a Dubai sovereign bond issue showed. Dubai s spending on infrastructure projects fell by 20% to AED 7.1 bn in 2011 and stood at half of the level in 2008, when the global financial crisis burst its property bubble, stalling projects worth billions of dollars. Revenue in Dubai, whose budget makes up around 11% of all public funds spent in the UAE a year jumped 8.1% to AED 32.3 bn in 2011 from the previous year. Most Active Stocks for the Month Volume (000 shares) Value (000 AED) Close (AED) TAMWEEL 554, , Dubai Financial Market 464, , National General Cooling Co. (Tabreed) 439, , EMAAR Properties 437,028 1,407, Arab Technical Construction Co. 418,129 1,446, Best Return Performers Close (AED) M-T-M % Chg Worst Return Performers Close (AED) M-T-M % Chg Dubai Islamic Ins. & Reinsurance Co % Air Arabia Co (17.46%) Arab Technical Construction Co % Tabreed (17.31%) Dubai National Ins. & Reinsurance % Deyaar Development (13.51%) EMAAR Properties % Al Salam Bank - Sudan (12.21%) Ajman Bank % Gulf Navigation Holding (11.52%) DFM Sectors Performance Monthly Trading Indicators Valuation Multiples Market Cap M-T-M Volume Value P/E P/B Dividend (Mn AED) % Chg (000 Shares) (000 AED) (X) (X) Yield (%) Banking 50,335 (4.02%) 1,049,433 1,206, % Consumer Staples 1,528 (2.86%) % Investment & Financial 18,423 (2.08%) 587, ,744 NM % Insurance 8,901 (0.29%) 265, , % Materials 30,197 (0.38%) NM % Real Estate & Construction 37, % 1,510,119 3,224,114 NM % Telecommunication 15,347 (1.01%) 280, , % Transportation 24,339 (2.72%) 563, ,538 NM % Utilities 850 (17.31%) 439, , % Total for DFM 187,648 (1.02%) 4,696,530 6,743, % 16

19 Qatar Exchange Benchmark Return Closing Value April-12 Point (%) 60 Day (%) 90 Day (%) YTD-12 (%) QE 20 Index 8, (87.09) (0.99%) (0.43%) 1.58% (0.86%) Market Review The QE 20 Index reversed its two month positive trend to drop 0.99% to 8, and reversing its YTD-12 return to a loss of 0.86%. The sell-off coincided with a surge in trading indicators with volume increasing 25% to mn shares from mn, while value increased 12% to QAR 7.2 bn (USD 1.97 bn). Volatility decreased during the month to 5.82%, remaining low as compared to the previous 12 month average of 9.64%. Aggregate market capitalization increased 0.12% during the month to QAR bn (USD bn) as compared to last month s market capitalization of QAR The month was marked by a change in the market s sector distribution as the exchange followed on the heels of last month s announcement of new indices with the establishment of new sectors. The companies of the QE Exchange are now distributed amongst 7 sectors: Banking & Finance, Consumer Goods & Services, Industrial, Insurance, Real Estate, Telecom, and Transport. Investors should now have a clearer reading of market performance. Under the new distribution, the top gainer for the month was the Industrial sector with a 2.45% growth in market cap to QAR bn (USD 33.1 bn), while the top loser was the Transport sector shedding 5.44% to QAR 18.7 bn (USD 5.1 bn). QE 20 Index 52 Week Performance Relative to Volume QE 20 Index Value 9,400 9,200 9,000 8,800 8,600 8,400 8,200 8,000 7,800 7, , Vol. Traded (shr. mil.) During the month, all 42 companies in the bourse announced their Q1-12 earnings, which posted a 28% jump in net profit to QAR 38 bn (USD 10.5 bn) as compared to QAR (USD 8.18 bn) during the same period last year. All sectors, except the services sector, posted growth for the quarter with the industrial sector leading the gains with a surge in earnings of 82% to QAR (USD 3.43 bn) as compared to QAR 6.88 bn (USD 1.89 bn) the previous year. The heavyweight banking sector also grew impressively by 22% to record QAR bn (USD 4.12 bn) as 17

20 compared to a previous QAR bn (USD 3.37 bn). As for the insurance sector it grew at a slower pace of 5.2% to QAR mn (USD mn). On the other hand, the services sector witnessed its earnings drop 2% to QAR 9.62 bn (USD 2.64 bn) as compared to QAR 9.76 bn (USD 2.68 bn) in Q1-11; the performance was significantly impacted by Q-Tel s 9.8% drop in earnings to QAR 2.61 (USD mn) which cited foreign exchange losses and also announced that it will be using cash to pay off 2012 debt. In corporate news, Qatar National Bank (QNB), the country's largest bank, has acquired a 49% stake in Libya's Bank of Commerce and Development as part of the Qatari lender's aggressive expansion strategy. The deal comes in line with QNB's strategic plan of international expansion in selected and promising markets, according to QNB group CEO. The bank also increased its stake in Iraq s Mansour Bank from 23% to 51%. According to the memorandum of understanding signed between the two banks, QNB will manage Mansour Bank and provide it with technical and logistical support. Furthermore, Qatar National Bank has made a higher bid for Denizbank, the Turkish unit of stricken Belgian lender Dexia, after earlier talks stalled over price. Denizbank is worth $5.9bn in the current market after a 49% run-up since news of the sale emerged, and Dexia is understood to be looking for up to $4bn for the bank. Meanwhile, Qatar Navigation is tapping the market with a rights issue to raise as much as QAR 1.31bn to shore up its capital base and part fund its expansion. In other news, Qatar National Hotels Company (QNH) has renamed its brand to Katara Hospitality, which was announced in this year's Arabian Travel Market in Dubai. In ratings news, Moody s stated that the outlook on Qatar's banking system is stable, reflecting Qatar's strong macro environment and high public spending levels that will continue to sustain growth and bank lending activity over the month outlook period. Moody's says that the stable outlook also captures the banks' limited asset-quality pressures and healthy capitalization levels, the stable deposit base and significant liquidity buffers, and the strong earnings potential. The report also notes that these supportive factors are counterbalanced by high levels of concentrations on both sides of the balance sheet; the banks' dependence on the domestic economy, which is undiversified and heavily reliant on the oil and gas sector; and the credit risks relating to exposures to the construction and real-estate sector. Moody's estimates that Qatar's real GDP will expand by 6 %in 2012, driven by high oil prices, strong liquefied natural gas export volumes and accelerated public spending, which will stimulate the nonoil economy. This, in turn, will support banks' asset quality, drive credit growth -- likely to be between 20%-25% during and increase bank revenues. In economic news, Qatar has booked a huge budget surplus in one year up to March, earning more than double the conservative estimate on which the budget for fiscal was based. The budgetary surplus will allow the country to deploy its resources prudently as has been the case in the past and increase spending on infrastructure upgrade and key sectors such as education and health. Qatar s economic outlook for 2012 remains positive despite increased external risks, the International Monetary Fund (IMF) said as it projected a 9% growth for the country s nonhydrocarbon sector next year. Large infrastructure investment and increased production in the manufacturing sector will boost Qatar s real non-hydrocarbon GDP growth, which will accelerate to 9%, the IMF said recently. Qatar s real GDP growth rate is projected to moderate to 6% in 2012, the IMF said. Real hydrocarbon GDP will slow down to less than 3% due to the country s selfimposed moratorium on developing new hydrocarbon projects until Continued government investment will keep growth in the non-hydrocarbon sector between 9% and 10% beyond Qatar is aiming to increase the role of its non-hydrocarbon sector to 80% of the economy by Significant investment is being made on projects such as the New Doha International Airport, Pearl Island and Mesaieed Industrial City's port. Qatar has established a strong reputation in the transportation, media and real estate space, with the Qatar Science and Technology Park now 18

21 housing more than 30 ventures in areas such as life sciences, oil and chemicals, environment, electronics and software engineering. Qatar's financial sector has also seen rapid development serving the needs of a larger and more complex economy. Qatar's banking sector has expanded significantly. Bank assets grew from QR50 billion in 2000 to 608 billion in 2011, a jump from 78 % to 96% in the ratio of bank assets to GDP. Qatar's equity market is also developing rapidly. However, the greatest of all investment is being placed on human development - specifically in health care and education. Qatar is transforming these sectors to ensure that in time its greatest resource becomes its people, and that their health and well-being is a top priority. QE Most Active Stocks for the Month Volume (000 Shares) Value (000 QAR) Close (QAR) Mazaya Development Company 40, , Al Rayan Bank 30, , VODAFONE 28, , Dlala Brokerage & Investment Holding 24,447 1,028, Gulf Holding Co. 20, , Best Return Performers Worst Return Performers Close (QAR) M-T-M % Chg Close (QAR) M-T-M % Chg Dlala Brokerage & Investment Co % National Leasing Co (8.97%) Medicare Group % Qatar Navigation (6.57%) Islamic Finance Securities % The Commercial Bank of Qatar (6.25%) Al Ahli Bank of Qatar % Qatar General Ins. & Reinsurance (5.70%) Gulf Holding Co % Qatar Gas Transport Co (5.54%) Sectors Performance Monthly Trading Indicators Valuation Multiples Market Cap M-T-M Volume Value P/E P/B Dividend Yield (Mn QAR) % Chg (000 Shares) (000 QAR) (X) (X) (%) Banking & Finance 186,171 (0.90%) 84,318 2,631, % Consumer Goods & Services 19, % 41,321 1,346, % Industrial 120, % 34,537 1,248, % Insurance 10, % 1,230 55, % Real Estate 69,102 (3.00%) 63, , % Telecom 39, % 29, , % Transport 18,661 (5.44%) 22, , % Total Market 463, % 161,406 7,173, % 19