Kuwait Monthly Report | August
- The Kuwait
equity space took a hit in line with the rest of the world due to the Covid-19
- The MSCI
Inclusion postponement was a blessing in disguise as it has allowed firms time
to stabilise prior to the inclusion inflows.
- The oil price
war in Q1 coupled with the Covid-19 impact has created a buying opportunity
ahead of the MSCI inclusion as most announcement and inclusion premiums have
After witnessing gains for three
consecutive months, Kuwait Indices marked the biggest decline in the Gulf
Cooperation Council (GCC). This primarily led a broad-based decline with all
four indices ending the month in a range of
-2.5% to -3.5%. The key indices, the Premier Market index and the Main 50 index,
had similar declines of -3.4% and -3.3% respectively. This resulted in a 3.2%
decline in the All Share Index. The Basic Materials index was the biggest loser
for the month, declining by -6.7%.
All four constituents of this
index slipped, with Boubyan Petrochemicals marking the steepest decline of -12.4%.
The company’s shares declined after news reports of an investigation in one of
its investments in Kuwait.
is no guarantee of future performance.
Source: Bloomberg, HANetf
*July figures based on
01.07.20 – 31.07.20
**YTD figures based on
01.01.20 - 31.07.20
***12 Month figures based on 30.06.19 -31.07.20
The banking sector, biggest by
market cap, marked an overall fall during the month of July. Gulf Bank saw the biggest drop of -10.4%,
while sector leaders NBK and KFH declined by -3.9% and -5.6% respectively. AUB
Bahrain was the only stock in the Premier Market which gained 6.3% during the
month, while all the other constituents witnessed a drop. Hit by the monthly
downtrend, Kuwaiti benchmarks melted further in terms of YTD-2020 returns. The
YTD-2020 decline of the Premier stood at -22.4%, whereas the Main Market index
recorded a relatively lower decline of -16.8%. Within the Premier Market only
Mezzan Holding, which belongs to the food segment, carried a YTD-2020 return of
16% whereas all the other constituents were in the red.
In terms of gainers, only two
sectors ended the month on the green turf; namely the Healthcare index with a
2.2% gain and the Oil & Gas index with a 0.4% gain.
performance is no guarantee of future performance
Source of all data: KMEFIC, data as of 31.07.20
KMEFIC FTSE Kuwait Equity UCITS ETF (KUW8) – 1 Year Performance (31/07/19 – 31/07/20)
Past performance is not an
indicator for future results and should not be the sole factor of consideration
when selecting a product. Investors should read the prospectus of the Issuer
(“Prospectus”) before investing and should refer to the section of the
Prospectus entitled ‘Risk Factors’ for further details of risks associated with
an investment in this product. Source: Bloomberg / HANetf. Data as of 31/07/20
While budget reform has been a constant talking point in
Kuwait for several years, it has never been spoken about with urgency and
limited action has been taken. There have been some budget cuts across the
board to several government institutions, as well as an effort to reduce the workforce,
which accounts for a large part of government spending as over 70% of the
workforce works in the public sector . These cuts will force
institutions that had been running inefficiently to buckle down and stem the flows.
In addition, there has been an active effort to finally implement a government
taxation plan in the form of VAT on specific goods. Finally, there has been
talk of cutting or reducing several citizen subsidies, such as the subsidy on
electricity in light of the fact that the citizens pay no government tax.
In response to two large corruption scandals breaking in
the country, the government seems to have doubled its efforts to fight
corruption. This effort has been gaining a lot of momentum in the past two to
three years, with several high-profile cases found and investigated. Furthermore,
anti-money laundering efforts have been gaining momentum as well.
Additionally, there has been talk of a stimulus plan, the
first of which saw government support for the private sector to prevent the
collapse of the non-oil sector due to COVID-19. Especially the burgeoning
F&B space which has been heavily impacted by COVID-19.
forward, the major event will be the MSCI inclusion. While the pandemic has
provided uncharted territory in terms of how this inclusion was implemented,
the decision to postpone was correct. Kuwait has seemingly successfully
controlled the situation and is now slowly opening the economy back up. As of
June 28th, it has implemented phase 3 of its plan to open up the economy to 50%. 
equity markets have experienced several months of volatility, with performance fluctuating
up and down. January saw a large increase in anticipation for the MSCI
inclusion which was announced in December, however the Covid-19 situation in
March shot the market way down, losing most of the MSCI premiums. April, May,
and June saw weekly fluctuations but have managed to net out slight monthly
gains before a small decrease in July. 
compared to the start of the year and the MSCI premiums, prices are very
attractive compared to post-announcement premiums in January. Buying pressure
will slowly ramp up again prior to the inclusion date in November. As for the
broad economic outlook, Kuwait will be hurt by COVID-19, as will the rest of
the world. However, if the government recognises the wake-up call to implement
budget reform, this will significantly benefit Kuwait down the line when
combined with its efforts to boost its non-oil economy in the vision 2035 plan.
major talking point for Kuwait ETF constituents will be looking at Kuwait Finance House and Ahli United Bank, who represent
14.43% and 13.27% respectively as of July 31st. These constituents
are two major financial institutions in Kuwait who were slated for a merger
prior to the inclusion in May. This would have led to a boost to the inclusion
premiums the fund was expecting. However, due to the pandemic, both banks felt
it necessary to postpone the merger. We have since heard little to no news on
when this merger will happen. However, with the economy slowly opening back up
it is expected that more news will follow.
|Top 10 Constituents
|National Bank of Kuwait SAKP
|Mobile Telecommunications Co K
|Kuwait Finance House KSCP
|Ahli United Bank BSC
|Agility Public Warehousing Co
|Boubyan Bank KSCP
|Gulf Bank KSCP
|Mabanee Co SAK
|Humansoft Holding Co KSC
|Boubyan Petrochemicals Co KSCP
|Industrial Goods & Services
Source: HANetf data as of 31/07/2020
KMEFIC FTSE Kuwait Equity UCITS ETF is a UCITS compliant Exchange Traded Fund
domiciled in Ireland.
fund tracks the FTSE Kuwait All Cap 15% Capped Index, an index of large, mid
and small cap securities trading on the premier or main market of Kuwait Stock
Exchange. The fund seeks to provide targeted exposure to an emerging market
with significant growth potential.
remember that the value of your investment may go down as well as up and past
performance is no indication of future performance.
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