The Month That Was. MENA, GCC and the World. Kuwait Financial Centre Markaz R E S E A R C H. Global Markets Trends July 2014.

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1 Kuwait Financial Centre Markaz R E S E A R C H Research Highlights: Review of global and regional stock markets for July 2014 Markaz Research is available on Bloomberg - Type MRKZ <Go> Thomson Research, Reuters Knowledge Nooz Zawya Investor ISI Emerging markets Capital IQ FactSet Research Connect TheMarkets.com M.R. Raghu, CFA, FRM Head of Research rmandagolathur@markaz.com N.C. Karthik Ramesh Manager - Research Ext : 4611 kramesh@markaz.com Nivas Lakshminarasimhan Analyst Ext : 4606 nlakshminarasimhan@markaz.com Global Markets Trends July 2014 Equity The Month That Was MENA, GCC and the World Last close July 2014% YTD% S&P GCC MSCI World 1, S&P 500 1, MSCI Emerging Markets 1, MSCI Frontier Markets 1, Fixed Income US Treasury 10Yr Bond Commodities Oil (IPE Brent) Gold 1, Source: Reuters, Zawya, Markaz Research After witnessing the biggest monthly drop since November 2008, the Gulf markets were buoyed by positive second quarter earnings, as all MENA indices ended July in green. Dubai (23 per cent), Qatar (12 per cent) and Abu Dhabi (9 per cent) indices were the biggest gainers, as banking sector registered positive Q2 results, with the real estate sector expected to follow suit. While the holy month of Ramadan has historically been known for low investor activity, July 2014 was a record month for Dubai, as the index recovered from a bearish June that had wiped out nearly a quarter of its value. Property stocks led the rally, belying fears of property market overheating, with index heavyweight, Emaar Properties, rising by over 16 per cent. Arabtec witnessed a 61 per cent loss in June, after the company s CEO, Hasan Ismaik, resigned abruptly, and rumors about employee lay-offs, management turmoil, lack of proper disclosures, and loss of government backing, influenced investors to shun the company. With the company s recent attempts to cut expenditures and increase productivity, and declaration of a 11 per cent jump in second quarter earnings, the stock climbed back 63 per cent in July. Kuwait Financial Centre K.P.S.C Markaz P.O. Box 23444, Safat 13095, Kuwait Tel: Fax: markaz.com A similar trend was seen in the Abu Dhabi market, which recouped from a 13 per cent fall in June, to post a 9 per cent increase in July. Government owned Aldar Properties, which is the largest real estate developer in the Emirate, declared second quarter earnings that were in line with expectations. With the announcement of a new CEO in July and projects with Dh 5bn in the kitty, the company recorded a handsome 22 per cent increase last month. The unveiling of the football stadium plans and optimistic expectations of Q2 earnings had a positive impact on the Qatar Index, as blue chip companies surged ahead in July, with banking and infrastructure sectors leading the way.

2 The index recovered from a 16 per cent drop in June, despite some uncertainties surrounding the 2022 World Cup. Plans to open up the Saudi Arabian market for direct investment by foreign institutions in the first half of next year helped the TASI index breach the psychological 10,000 barrier. While the opening up will happen in a phased manner, the markets are set to attract inflows worth USD 35bn, with the banking and non-oil sectors expected to benefit the most. Among the MENA (ex-gcc) countries, Egypt was the top performer with a 7 per cent increase in July. Kuwait weighted index posted a modest recovery of 2.6 per cent, after falling close to 5 per cent in June. The top performers were Kuwait Food and Kuwait Finance House, which recorded an increase in share price of 10 per cent and 6.5 per cent, respectively. While the former is courting private equity players willing to pay USD 5bn for the group 1, the latter reported a 6.4 per cent rise in Q2 profit. Among the MENA (ex-gcc) countries, Egypt was the top performer with a 7 per cent increase in July, while Morocco and Jordon posted marginal increases from June. A 39 per cent increase in second quarter earnings for Egypt s bellwether stock, the Commercial International Bank (CIB), beat analyst estimates, and led to an 18 per cent increase in the share price of the company. Saudi Arabia s CMA announced plans to open up the stock market for direct investment by foreign institutions. With the GCC markets on the uptake, S&P GCC recorded an increase of 8.1 per cent in the month of July, and closed at 139 points. Global Markets had mixed results in June, as S&P 500 and MSCI world fell by 1.5 and 1.7 per cent, respectively, while Emerging market and Frontier market indices rose by 1.4 and 1.5 per cent, respectively. S&P 500 witnessed its first monthly decline since January, as the Fed continued to cut back on its monthly bond buying, with a sixth consecutive USD 10bn reduction. The slow transition from low interest rate to high interest rate environment, coupled with investors selling off on global cues, is creating volatility in the market. Saudi Arabia opens market to foreign institutions As part of ongoing economic reforms, Saudi Arabia s Capital Market Authority (CMA) announced in July, plans to open up the stock market for direct investment by foreign institutions in the first half of This has already attracted the attention of large foreign institutions, such as Morgan Stanley, Standard Chartered PLC, Bank of America Corp, Credit Suisse, HSBC and JPMorgan, as many are waiting in the wings for the largest and relatively wellregulated GCC market to allow outside investors. At present, foreign investors, other than those from neighboring Gulf States, are limited to buying Saudi stocks either through swaps or exchange-traded funds. Once the reform is in effect, Saudi companies, especially the non-blue chip companies, will attract foreign money, as currently the cost of swaps makes it uneconomical for foreign investors to invest in smaller companies. 1 Arabianbusiness.com Kuwait Financial Centre Markaz 2

3 This move will increase efficiency of the market, as overall liquidity will improve, and companies will adhere to stricter corporate disclosure requirements in order to attract foreign funds. Although the announcement has led to renewed optimism, it is expected that the regulator will keep inflows gradual to avoid destabilizing the market. Fig 1: Tadawul index breaches 10,000 mark Tadawul index closed the month up 7.4 per cent from June, crossing the 10,000 point barrier for the first time since April Source: Reuters Dubai s Marka will list its shares in the DFM in September Announcement of this news led to a surge in blue chip companies, as retail investors and Middle East funds went on a buying spree to cash-in on possible price appreciation, primarily of government backed entities. Saudi Basic Industries (SABIC) rose by 12.4 per cent in July, while Saudi Electricity and Saudi Telecom jumped 10.5 and 9.4 per cent, respectively. With the blue chip companies leading the rally, the index closed the month up 7.4 per cent from June, crossing the 10,000 barrier for the first time since April MENA IPO Activity Al Hammadi Company for Development and Investment (Saudi Arabia), was listed in Tadawul, on the 15 th of July. The company was oversubscribed by close to 2x, and successfully raised SAR 630mn, representing a 30 per cent stake, by issuing 22.5mn shares. In other IPO related news, Dubai s Marka will list its shares in the DFM in September The company raised AED 283mn, representing a 55 per cent stake, by offering 275mn shares. While the subscription ended in April this year, the company halted its plans to list in the first week of June, as the market was hit by massive volatility, due to the profit taking spree post inclusion in the MSCI emerging markets index coupled with the Arabtec fiasco. Marka plans to open more than 100 fashion retail outlets, restaurants and cafes in the UAE, and across the Gulf region in the next five years. Kuwait Financial Centre Markaz 3

4 Appendix MENA Market trends M. Cap (USD Bn) Last close 2013% Jul 14 YTD % S&P correlation** ADVT* (USD mn) P/E TTM P/B TTM Div. Yield Index S&P Pan Arab LargeMid Cap N.A Saudi Arabia , , Qatar , Abu Dhabi 128 5, Kuwait Price Kuwait Wt.ed Dubai 89 4, Egypt Morocco 55 9, Jordan 22 4, Bahrain 22 1, Oman 20 7, Source: Reuters, Zawya, * - Average Daily Value Traded for the month, ** - 3-year daily return correlation Kuwait Financial Centre Markaz 4

5 MENA Markets Heat Map July ,000 Current 20,634 20,000 15,000 13,910 15,654 14,684 12,109 10,000 8,484 10,491 6,237 5,000 5, ,130 4,230 Saudi Arabia (TASI) Qatar (QSI) Kuwait Price (KWSE) 2,902 1,035 Bahrain (BAX) 4,223 Oman (MSI) 2,136 Abu Dhabi (ADI) 1,301 Dubai (DFMGI) 1, Egypt (HRMS) 1,327 3,070 Jordan Morocco (AMMAN) (MASI) Source: Reuters Kuwait Financial Centre Markaz 5

6 MENA Index Saudi Arabia Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % -8.8% 7.3% 19.6% 4.8% -5.0% 3.2% -2.0% 11.7% -0.8% 1.4% -3.7% 27.5% % 3.0% 5.6% 1.0% -10.9% -0.4% 3.1% -2.8% 4.7% -0.6% -0.6% 4.8% 8.2% % -6.5% 10.5% 2.3% 0.4% -2.4% -2.8% -6.5% 2.2% 1.8% -1.9% 5.1% -3.1% % 9.7% 7.7% -3.5% -7.7% -3.8% 2.5% 3.8% -4.2% -0.7% -3.8% 4.1% 6.0% % -0.6% 1.8% 0.8% 3.1% 1.2% 5.6% -1.9% 2.6% 1.0% 3.5% 2.5% 25.5% % 3.9% 4.0% 1.2% 2.5% -3.2% 7.4% 19.7% 2.13 Kuwait Wt.ed Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % -8.2% 10.4% 10.5% 11.1% 2.1% -2.6% 6.7% -2.4% -7.1% -8.5% -0.3% -5.2% % 13.5% 3.7% -1.2% -6.6% -2.3% 5.5% 4.0% 6.9% 1.8% -1.6% 3.8% 25.5% % -5.8% -3.2% 6.6% -5.1% -2.2% -4.2% -3.2% 1.6% 1.7% -1.3% -1.0% -16.2% % 1.1% 2.6% -0.7% -3.1% -0.6% -1.7% 1.2% 4.4% -2.7% 4.2% -1.5% 3.0% % -0.1% 0.4% 5.1% 4.5% -6.1% 3.3% -2.3% 2.5% 1.0% -1.8% -1.3% 8.4% % 1.1% 3.9% 1.8% 0.3% -4.7% 2.6% 6.4% 1.18 Kuwait Price Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % -4.7% 4.7% 12.0% 7.8% -0.9% -5.0% 3.1% -1.2% -6.0% -5.6% 1.0% -10.0% % 5.0% 2.1% -3.1% -8.2% -2.3% 1.7% 0.5% 4.4% 1.1% -2.4% 0.9% -0.7% % -5.5% -2.9% 3.6% -2.2% -2.6% -2.9% -4.0% 0.7% 1.5% -1.8% 0.0% -16.4% % 4.4% 0.6% 3.3% -2.7% -6.5% -1.2% 2.5% 2.0% -3.6% 3.1% -0.2% 2.1% % 3.5% 4.0% 10.5% 11.7% -6.4% 3.8% -5.4% 1.8% 2.3% -2.0% -3.0% 27.2% % -0.8% -1.6% -2.2% -1.6% -4.4% 2.3% -5.5% 0.92 Abu Dhabi Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % 5.3% 4.7% 1.6% 6.1% -1.8% 6.4% 3.4% 7.8% -3.2% -11.7% 2.8% 14.8% % 2.7% 7.6% -4.5% -6.2% -3.5% 1.3% -1.9% 7.0% 5.3% -3.1% -0.4% -0.9% % 0.1% 0.7% 3.4% -2.1% 2.5% -3.1% -0.1% -3.2% -1.3% -2.3% -1.7% -11.7% % 6.4% -2.2% -1.9% -2.5% 0.3% 2.4% 2.2% 1.7% 2.6% 0.1% -1.6% 9.5% % 5.7% -0.6% 8.2% 8.8% -0.3% 8.3% -2.9% 2.9% 0.1% 0.1% 11.4% 63.1% % 6.1% -1.3% 3.1% 4.1% -13.4% 8.8% 15.4% 2.07 Kuwait Financial Centre Markaz 6

7 Dubai Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % 2.5% 0.6% 2.4% 17.0% -5.0% 1.9% 5.3% 14.5% 0.3% -11.7% -7.0% 10.2% % 0.2% 15.7% -5.6% -9.2% -7.5% 3.5% -1.9% 13.5% 4.8% -5.4% -2.3% -9.6% % -8.1% 10.3% 5.0% -4.5% -2.8% 0.0% -1.7% -4.1% -1.7% -2.1% -1.9% -17.0% % 20.5% -4.7% -1.1% -9.8% -1.3% 6.3% 0.3% 2.0% 2.6% -0.7% 0.9% 19.9% % 2.1% -5.1% 16.7% 10.8% -6.1% 16.5% -2.5% 9.5% 5.8% 0.8% 14.4% 107.7% % 11.9% 5.5% 13.7% 0.6% -22.5% 22.6% 43.4% 2.95 Bahrain Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % -4.7% 1.2% 0.0% 1.6% -2.5% -5.0% 1.0% 2.5% -1.8% -5.7% 1.4% -19.2% % 2.7% 1.9% 2.9% -8.9% -3.7% -0.2% 1.8% 1.8% 1.2% -1.7% -0.4% -1.8% % -1.2% -0.4% -1.4% -4.1% -2.0% -2.1% -2.6% -7.4% -1.6% 1.3% -1.7% -20.1% % 0.8% 0.3% 0.0% -1.1% -1.1% -2.4% -1.2% 0.1% -2.7% -0.9% 1.6% -6.8% % 0.4% 0.2% 1.2% 8.4% -0.7% 0.6% -0.6% 0.5% 0.7% 0.6% 3.3% 17.2% % 6.1% -1.1% 5.2% 2.2% -2.2% 3.1% 17.8% 0.82 Oman Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % 0.8% -4.6% 10.8% 7.2% 2.0% 4.2% 8.5% 3.6% -3.3% 0.0% 0.2% 17.0% % 2.4% 0.1% 2.0% -7.8% -3.8% 3.9% -0.6% 3.5% 1.2% 0.6% 2.5% 6.1% % -10.2% 0.4% 2.7% -5.2% -1.5% -1.8% -0.7% -2.9% -0.3% -3.0% 5.1% -15.7% % 5.0% -2.5% 3.1% -1.9% -1.1% -5.8% 2.3% 1.0% 2.3% -2.2% 4.1% 1.2% % 3.0% 0.2% 2.3% 4.7% -1.2% 4.8% 0.7% -0.7% 0.4% 0.8% 1.6% 18.6% % 0.4% -3.6% -1.9% 1.9% 2.2% 2.7% 5.4% 1.32 Qatar Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % -15.5% 10.1% 14.7% 24.6% -7.0% 3.3% 6.1% 4.2% -3.8% 0.8% -3.3% 1.1% % 4.8% 8.6% 1.1% -10.1% 1.7% 1.9% 2.8% 6.5% 1.3% 4.4% 6.6% 24.8% % -9.3% 6.6% 1.1% -2.0% -0.2% 0.5% -0.6% 0.5% 2.4% 0.0% 2.2% 1.1% % 2.1% 0.5% -1.0% -3.3% -3.5% 2.2% 2.2% 0.3% 0.4% -1.7% -0.5% -4.8% % -2.2% 0.6% 1.2% 6.5% 0.4% 4.6% -0.9% -0.1% 2.4% 5.5% 0.0% 24.2% % 5.5% -1.1% 8.9% 8.0% -16.1% 12.1% 24.1% 1.87 Kuwait Financial Centre Markaz 7

8 Jordan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % -5.9% 0.1% 0.4% 13.0% -7.0% -3.6% 0.5% 1.7% -3.4% -1.2% -1.1% -11.6% % -2.4% 0.2% 2.3% -6.8% -0.5% -1.3% -2.5% 4.0% 1.9% 0.3% 3.2% -3.7% % -4.9% -3.2% 1.6% -2.0% -1.6% 1.1% -2.3% -3.9% 2.5% -3.6% 3.5% -12.6% % 2.4% 3.8% -1.0% -5.3% -0.1% -0.9% 6.0% -1.3% 0.0% 0.5% 0.4% -1.2% % -1.0% 0.7% -3.7% 0.5% -3.6% -1.2% -5.8% -4.8% 7.3% 1.8% 1.4% -5.6% % -2.5% -0.3% 0.3% 0.7% -2.5% 0.4% 3.2% 0.72 Morocco Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % 10.6% -7.2% 5.2% 0.8% 5.1% -5.3% 0.7% -2.6% 0.1% -5.3% 2.3% -4.9% % 1.5% 2.9% 7.6% -1.8% -2.4% 0.1% -0.4% 1.4% 2.5% 0.2% 3.5% 21.2% % 1.7% -4.9% -5.1% 5.6% -5.6% -2.7% 2.8% -0.4% -1.0% -3.5% 0.7% -12.9% % 1.7% -4.0% -6.0% -0.1% -2.3% -2.0% 1.0% -4.8% 0.3% 2.4% -3.8% -15.1% % -0.7% 1.2% 1.2% -2.6% -1.3% -2.4% -1.9% 3.1% 8.2% -1.3% -1.6% -2.6% % 3.5% 0.8% -0.5% 0.2% -2.8% 1.1% 2.4% 0.85 Egypt Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % -9.1% 17.5% 20.5% 12.7% -2.8% 9.5% 7.8% 1.2% 0.8% -14.9% 5.7% 34.2% % -0.8% 3.0% 7.8% -12.4% -5.7% 4.0% 1.5% 4.2% 1.1% 1.8% 4.6% 15.7% % 0.0% -1.5% -5.6% 8.7% -2.2% -4.7% -7.8% 10.6% 7.7% -8.4% -8.0% -42.5% % 14.1% -7.0% -0.7% -4.2% 1.7% 2.5% 9.6% 9.7% -2.4% -15.4% 13.2% 44.4% % -1.5% -6.7% 3.5% 3.3% -11.9% 12.7% -1.5% 7.4% 7.6% -0.1% 8.3% 22.6% % 9.0% -1.7% 4.3% -0.1% -0.3% 7.0% 29.3% 2.04 Source: Reuters Kuwait Financial Centre Markaz 8

9 Disclaimer This report has been prepared and issued by Kuwait Financial Centre K.P.S.C (Markaz), which is regulated by the Central Bank of Kuwait. The report is owned by Markaz and is privileged and proprietary and is subject to copyrights. Sale of any copies of this report is strictly prohibited. This report cannot be quoted without the prior written consent of Markaz. Any user after obtaining Markaz permission to use this report must clearly mention the source as Markaz.This Report is intended to be circulated for general information only and should not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The information and statistical data herein have been obtained from sources we believe to be reliable but in no way are warranted by us as to its accuracy or completeness. Markaz has no obligation to update, modify or amend this report. This report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors are urged to seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and to understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security s price or value may rise or fall. Investors should be able and willing to accept a total or partial loss of their investment. Accordingly, investors may receive back less than originally. Past performance is historical and is not necessarily indicative of future performance. Kuwait Financial Centre K. P.S.C. (Markaz) does and seeks to do business, including investment banking deals, with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. For further information, please contact Markaz at P.O. Box 23444, Safat 13095, Kuwait. Tel: Fax: research@markaz.com Kuwait Financial Centre Markaz 9

10 Advocating Sound MENA Research Our Research Archive Infrastructure Power Egypt(2014) KSA(2013) Kuwait(2014) UAE(2014) Qatar(2014) GCC(2012) MENA (Ex- GCC) (2013) Ports KSA(2012) UAE(2012) Qatar(2012) Oman(2012) Kuwait(2014) GCC(2012) Aviation UAE(2014) KSA(2014) GCC(2012) Water Qatar(2014) Kuwait(2013) KSA(2013) GCC(2012) ICT KSA(2012) Kuwait(2013) UAE (2013) Qatar (2013) GCC(2012) Roads and Railways KSA(2013) Qatar(2013) GCC(2012) Economic Kuwait Credit growth (2014) BOT law: What s new? (2014) Internet of Things! Big Data (2014) Disruptive Technology: Bitcoins (2014) Kuwait's PPP Law (2013) Bankruptcy in the GCC (2013) Multiple directorships in KSA (2013) GCC Demographics (2012) Got a CMA: What Next? (2012) How is the GCC preparing for a AA+ World? (2011) Stress Testing Kuwait Banks (2011) MENA Unrest (2011) Kuwait Development Plan (2011) The New Regulations on Kuwait Investment Sector (2010) Kuwait Capital Market Law (2010) Diworsification: The GCC Oil Stranglehold (2009) Sector GCC Metals & Mining (2014) GCC Family Business (2014) GCC Office Real Estate Market (2014) GCC Research Knowledge Gap (2014) KSA Education (2014) KSA Asset Management (2014) Egypt Asset Management (2014) UAE Asset Management (2014) GCC Banking (2014) KSA Healthcare (2014) GCC Investment Banking (2013) GCC Petrochemicals (2013) GCC Education (2013) GCC Women Investors (2013) GCC Media (2013) GCC Retail (2013) FIFA World Cup 2022 (2013) Mena Asset Management (2013) GCC Islamic Finance (2013) GCC Insurance (2013) GCC Residential RE (2013) GCC Media (2013) GCC Contracting (2013) GCC Healthcare (2012) Capital Market Mena Asset Management Policy Perspectives (Dec-13) Including GCC in the MSCI EM Index (Oct-12) Alpha Abound (Aug-12) Kuwait Investment Sector (Mar-12) GCC Defensive Bellwether Stocks (Jan-12) KSE 15 Index (Sept-11) Kuwait Investment Sector (Sept-10) The Golden Portfolio (Sept-10) Persistence in Performance (Jun-10) GCC Banks - Done with Provisions? (Jan-10) Missing the Rally (Jun-09) Policies Towards Involving Kuwaitis in the Private Labor Market (2013) Powering Kuwait into the 21 st Century - Alternatives for Power Generation (2013) Powering Kuwait into the 21 st Century - Adopting a sustainable power strategy (2012) Tools to Strengthen & Support Kuwait s Private Sector (2012) Daily Morning Brief Markaz Kuwait Watch Monthly Fixed Income Update MENA Real Estate Monthly Round Up International Market Update Market Review Quarterly Equity Risk Premium Annual Policy Periodic Global Outlook Half yearly GCC Outlook Corporate Earning Access Our Reports Bloomberg - MRKZ <Go> Thomson Research, Reuters Knowledge Nooz Zawya Investor ISI Emerging markets Capital IQ FactSet Research Connect TheMarkets.com Paid reports ranging from US$ Complimentary reports

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