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Kuwait Monthly Report | September

  • The Kuwait equity space took a hit in line with the rest of the world due to the Covid-19 pandemic. 
  • The MSCI Inclusion postponement was a blessing in disguise for Kuwaiti firms and our Kuwait ETF as it has allowed firms time to stabilize 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 been wiped.

Performance Review

What has driven this performance?

Kuwait markets ended the month positively with the Kuwait All Share Index registering a gain of 6.6% in August reflected the broader positive sentiment across the GCC markets. Regionally, the S&P GCC composite index gained 6.2%,[1] with all markets in the green. The Premier Market Index gained 8.1% during the month as 15 out of 19 constituents of the index saw monthly gains.[2] Among other sectors, the Consumer Goods Index was the top gainer, rising 9.9%, while the Consumer Services Index saw the biggest decline, down 5.1% for the month. Among Blue Chips, the National Bank of Kuwait gained the most at 9.0%, whereas Gulf Bank and Burgan Bank added 12.11% and 10% respectively. Agility Public Warehousing lost 2.5% for the month.

Market liquidity in August, as indicated by the average daily traded value, has increased by 30.6% over July to reach KWD 22.28 million, increasing from KWD 17.04 million a month ago. KFH topped the monthly value traded chart with shares worth KWD 113.1 million traded during the month. This was followed by AUB-Bahrain and Shamal Az-Zour Al Oula Power and Water Co. who experienced trades worth KWD 87.3 million and KWD 86.8 million.

Moreover, Kuwaiti parliament has adopted a new law which will allow companies to opt for a settlement with creditors or a restructuring plan before they are forced to declare bankruptcy.[3] This law aims to protect ailing companies and attract foreign investors. Meanwhile, the finance minister has highlighted the depletion of the treasury’s liquidity in view of prevailing low oil prices.

KMEFIC FTSE Kuwait Equity UCITS ETF Performance

August*  YTD**  12 Month*** 
8.06%  -15.70%  -10.52% 

Past performance is no guarantee of future performance.

Source: Bloomberg, HANetf.  *August figures based on 31.07.20 – 31.08.20 **YTD figures based on 31.12.19 - 31.08.20 ***12 Month figures based on 31.08.19 -31.08.20

 

KMEFIC FTSE Kuwait Equity UCITS ETF

Total Return NAV to Date (up to 31.08.2020)

  1 M   3 M   6 M   YTD  12 M   Since Inception 
KMEFIC FTSE Kuwait Equity ETF (Acc)  8.06%  8.94%  -12.24%  -15.70%  -10.52%  -5.94% 
FTSE Kuwait All Cap 15% Capped Index (NTR) 8.05%  9.11%  -9.785%  -13.98% -7.56%  -2.62% 

Past performance for the index is in USD. 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 31/08/2020

 

Industry News

Budget Reform

Budget Reform remains the main talking point as the budget deficit crunch looms. The current deficit has been bought about due to increased spending, lower oil prices, as well as the Covid-19 pandemic. As it stands, the finance minister stated that Kuwait does not have the cash on hand to pay salaries past October.[4] He hopes that putting a date on this will help get the Public debt law which will allow the government to borrow up to 65 Billion USD over the next 30 years to cover budget shortfalls.[5] The Kuwaiti government has warned parliament that they may pass the law by emergency decree should parliament not pass the law.[6]

1MDB-Scandal

The 1MDB scandal has proven to have more legs than previously thought as arrests have been made with wealthy businessman as well as royal family members. This may prove to be a landmark case as Kuwait’s anti-corruption stance is being actioned as opposed to past grandstanding.[7]  

Shamal Al Zour

The Shamal Az-Zour Al-Oula Power and Water Company listed on Boursa Kuwait on August 16th. Shamal Az-Zour is Kuwait’s first company established under the independent water and Power plant Law. The plant supplies about 10% of Kuwait’s installed power capacity and 20% of Kuwait’s water distillation capacity.[8]

 

Outlook 

GCC equity markets continued their 5th month of positive results in August. Kuwait markets gained 6.6% in August as per the All Share Index. Market liquidity in August has increased 45%. Allowing companies to opt for a settlement with traders, restructuring plans rather than forced bankruptcy, and additional structural changes has buoyed sentiments in the equity market. These parliamentary efforts as well as the public debt law aims to protects local companies as well as providing assurances to foreign investors regarding investments.

Oil Prices closed up 4.6% at the end of August on the back of signs pointing to an increase in demand as shown by a larger draw of U.S crude than forecasted. However, oil demands were as a whole revised downwards due partly to continued US-China trade tensions as well as lowered jet fuel demand.[9]

However, overall market sentiments are positive as even small cap stocks seem to be moving positively. With the expectation of the MSCI inclusion in November, outlooks are positive going forward.

 

Constituent News

The major talking point for the our Kuwait ETF constituents will be banking as Kuwait banks have proven outstanding resilience as well as a solid financial position at all levels of its components. It showed continuous asset growth in its credit portfolios as well as a stable deposit base. Total customer deposits have increased by 12% as per semi-annual financial results of the banking sector. Total customer loans and advances of the 10 Kuwaiti banks also increased at a growth rate of 9%. The National Bank of Kuwait showed a growth rate of 16% in terms of customer deposits followed by Kuwait Finance House at a growth rate of 14%. This made Banks to have the largest share of the Kuwait ETF. NBK lead in terms of a price gain for August market wide as a result with a gain of 9.0%.[10]

 

Top 10 Constituents and Weights  (%) 
 Ahli United Banks B.S.C. 15.32% 
National Bank of Kuwait  15.25% 
Mobile Telecommunications Co KSC  14.81% 
Kuwait Finance House KSCP  14.48% 
Agility Public Warehousing Co KSC  8.41%
Boubyan Bank KSC  6.70% 
Gulf Bank  4.77% 
Mabanee Co SAK  4.33% 
Humansoft Holding Co KSC  3.17% 
Boubyan Petrochemicals Co 2.60% 

Source: HANetf data as of 31/08/20

 

Fund Details

KMEFIC FTSE Kuwait Equity UCITS ETF is a UCITS compliant Exchange Traded Fund domiciled in Ireland.  

Our Kuwait ETF 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.  

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

EXCHANGE BB CODE RIC ISIN SEDOL CCY
London Stock Exchange KUW8 LN KUW8.L  IE00BGPBVS44 BGY9KV5 USD
London Stock Exchange  KUWP LN KUWP.L IE00BGPBVS44 BGSXQZ9  GBP
Borsa Italiana   KUW8 IM KUW8.MI IE00BGPBVS44 BGSGKH8 EUR
Deutsche Boerse Xetra KUW8 GY KUW8.DE DE000A2PD3R9 BJ9ZLG1 EUR

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