GCC markets posted a mixed performance in January despite a surge in oil prices, said top ratings agency S&P citing its regional index which witnessed a marginal decline 0.6% weighed down by the negative performance of Saudi and Abu Dhabi equity indices, which fell 1.4% and 0.7% respectively.

 

The GCC equity indices recorded mixed results for the month as the possibility of early rate cuts by the US Fed reduced due to strong Q4 2023 real-GDP growth in the US.

 

However, Kuwait equity index recorded a positive start to the year and was the top gainer among GCC markets in January 2024, stated Markaz in its monthly market review report for January. 

 

According to Markaz, the Kuwait market has rebounded after a decline in 2023. Kuwait All Share index rose 6.6% in January, supported by broad based gains in all the sectors.

 

The formation of a new Kuwaiti cabinet, pickup of non-oil activity and projections of rate cuts by US Fed in 2024, mainly in the second half of the year buoyed investor sentiment, it stated. 

 

Banking stocks recorded a 6.6% increase during the month. NBK and KFH, the two large banks in terms of market capitalization, registered monthly total returns of 9.6% and 6.3% respectively on anticipation of a positive earnings announcement. 

 

Among the premier market stocks, Kuwait Investment Company and Boursa Kuwait Securities Company gained the most, recording total returns of 49.6% and 17.7% respectively. 

 

Markaz pointed out that Kuwait’s consumer spending growth eased to 5.4% y/y (0.5% q/q) in Q4 2023 from 8.7% in Q3. Spending grew 8.6% y/y in 2023, normalizing from the post-pandemic surge of 21.7% in 2022. 

 

Kuwait’s budget deficit in the fiscal year 2024/2025 is expected to hit KD5.89 billion ($19.15 billion), down 13.5% on y/y basis based on the oil price assumption of $70/bbl. 

 

Kuwait real estate sales rose 13.6% q/q to KD771 million in Q4 2023, stated the report. 

 

Robust investment and commercial sector activity and a less marked decline in residential sector sales supported the real estate performance. However, on a y/y basis real estate sales dropped by 22% in 2023 to KD 2.8 billion in 2023 owing to higher interest rates and residential valuations, it added.

 

Qatar equity index fell 6.8% triggered by the sharp fall in natural gas prices. However, positive economic growth expectations for Saudi boosted the performance of few stocks. 

 

According to the World Bank, Saudi’s GDP is expected to grow by 4.1% in 2024, as the non-oil economy continues to get a boost from the Saudi Vision 2030 programs. 

 

Saudi Arabia is expected to tap the debt market in 2024 with estimated financing needs of $22.93 billion under its borrowing plan for deficit financing and repay upcoming debt maturities.

 

Global and US markets were mildly positive despite stronger than expected US economic growth reducing the possibility of early rate cuts. The MSCI World index and S&P 500 indices rose 1.1% and 1.6% respectively in January. 

 

Oil price settled at $81.7 per barrel, recording a monthly gain of 6.1% supported by the ongoing geopolitical conflicts in the Middle East and projections for strong oil demand in 2024. 

 

The disruption of oil supply from two major oil fields in Libya and attack in the Red Sea drove up oil prices. IEA expects oil demand to grow by 1.24 million barrels per day (bpd) in 2024, up 180,000 bpd from previous estimates.

 

Production outages in the US from cold weather also supported oil prices. 

 

The strong US dollar following waning expectations of an early interest rate cut in the US and rise in US treasury yields were behind the fall in gold prices. Natural gas prices witnessed a steep decline of 16.5% during the month amidst warmer temperatures expected in late January leading to reduced demand for heating.

 

According to Markaz, the global and GCC markets performance for February 2024 hinges on two major factors – indications from the US fed on the onset of the rate cuts and earnings announcement from the blue-chip companies.-TradeArabia News Service