GCC Capital Markets in 2018: Key Performance Figures

GCC Capital Markets in 2018: Key Performance Figures

GCC equities had their best performance in five years during 2018, rising by 12%, compared to declines in emerging market and global indices. But the detailed picture was mixed, with Saudi Arabia, Qatar and Abu Dhabi showing gains, but the Dubai Financial Market declining by 25%.

Fixed income issuance in the GCC fell by 14% in 2018, and global sukuk issance also fell as both Malaysia and Saudi Arabia, by far the biggest issuers, reduced new volumes. 

GCC IPOs also fell back, although there was significant activity in the Saudi REIT market.

 

GCC equity markets: mixed performance though markets as a whole were up in 2018

GCC equity markets recorded their best yearly performance in five years, outperforming many global indices, Kamco says. The MSCI GCC index rose by 12.1% compared to a 16.6% decline in the MSCI emerging market index and an 11.2% decline in the MSCI global index.  

Saudi Arabia’s Tadawul remains by far the biggest of the GCC stock markets, accounting for nearly half of their market capitalisation  and about 80% of trading value. 

The Tadawul was up 8.3% over 2018, marking its third consecutive year of positive gains, but the Qatar Exchange was the star performer, rising by 20.8%. 

The Dubai Financial Market fell by 24.9% over the year. Kamco notes that the decline in Consumer Staples st ocks (which fell by 62%) and Real Estate and Construction (down by 38.9%) reflected consumer sentiment in the emirate. Financial and Investment Services stocks were also down significantly, falling by 44%. 

In contrast, the Abu Dhabi Securities Exchange rose by 11.7%, although some observers have pointed out that the performance of the Exchange is driven to a significant extent by its two largest stocks, First Abu Dhabi Bank (FAB) and Ettisalat, which together account for about 60% of market capitalisation. FAB was up 38% over the year, but Union National Bank and Abu Dhabi Commercial bank also performed well, up 23% and 20%. Real Estate stocks declined, reflecting the general trend across the region. 

A link to the original article is here.

 

Performance

2018

Market Cap.

End 2018 ($bn)

Value of Trading 2018

($mn)

P/E

Bahrain Bourse

0.4

21.1

913

8.6

Borsa Kuwait

5.2

95.8

1,897

14.6

Muscat Securities Market

-15.2

12.6

1,016

9.2

Qatar Exchange

20.8

161.7

18,804

14.6

Tadawul (Saudi Arabia)

8.3

494.8

232,222

14.8

Abu Dhabi Securities Exchange

11.7

141.2

10,025

12.2

Dubai Financial Market

-24.9

91.0

16,140

7.1

 

Source: Kamco Research

 

MENA fixed income issuance falls, although prospects good for greater volumes in 2019

Total Middle East issuance was $145bn in 2018, compared to $173bn in 2017. (See table below for a country-by-country breakdown.) Seventy seven per cent of MENA issuance was conventional rather than sukuk. 

Governments accounted for 63% of all MENA bond issuance in 2018, compared to 77% in 2017: $76.1bn compared to $101.5bn. Financial companies accounted for nearly all of the remainder: $25bn in 2018, compared to $23bn. 

GCC issuance was $105.9bn, compared to $123.3bn in 2017. Of this, $72.6bn was bonds and $33.4bn were sukuk. 

Kamco is predicting higher issuance in 2019 as governments continue to spend on infrastructure while oil prices remain subdued. Saudi Arabia has said it will raise $32bn during 2019, which would be more than twice its issuance last year. 

Global sukuk issuance was $73.7bn in 2018, compared to $93.7bn in 2017. The decline was mainly due to lower volumes from Malaysia, although with issuance of $27.2, Malaysia was still the biggest player in the sukuk market in 2018, followed by Saudi Arabia with $18.6bn. (See country-by-country table below.)

Governments accounted for 61% of sukuk issuances in 2018 compared to 71% in 2017: $45.2bn compared to $66.3bn. Financial companies accounted for nearly all of the remainder: $14.7bn, unchanged on 2017. (That left $11bn for utilities, industrials and materials firms.)

A link to the original article on fixed income is here.

 

MENA bond and sukuk issuance ($bn)

2018

2017

Qatar

26.0

6.8

UAE

19.6

31.3

Lebanon

15.5

23.4

Saudi Arabia

13.9

13.5

Egypt

13.5

12.6

Oman

9.9

7.1

Jordan

4.7

5.8

Morocco

4.5

5.5

Bahrain

2.2

4.7

Kuwait

1.0

18.0

Tunisia

0.9

2.5

Total conventional bonds

111.7

131.2

Sukuk issuance (see table below)

33.4

41.4

Total fixed income issuance

145.1

172.7

 

 

Sukuk issuance ($bn)

2018

2017

Malaysia

27.7

34.9

Saudi Arabia

18.6

28.6

UAE

8.6

3.9

Indonesia

5.9

7.9

Supranational

3.9

3.1

Qatar

3.1

5.1

Turkey

2.3

2.7

Oman

1.8

2.6

Bahrain

1.3

1.2

Rest of the world

0.6

3.7

Total

73.7

93.7

 

GCC IPO volumes decline, although Saudi deficit financing may lead to more volumes in 2019

There were 18 issuances, raising $2.7bn in 2018, compared to 28 issuances raising $3.3bn in 2017. 

The 2018 market was dominated by Real Estate Investment Funds (REITs) in Saudi Arabia. There were eight of these, raising $1bn. When combined with the two corporate IPOs from Saudi Arabia, total Saudi capital raising was $1.3bn. 

Qatar Aluminium Manufacturing Company’s $754.5mn issue, in December, accounted for most of the remaining IPO value during 2018. The only other sizeable offerings were the Kuwaiti company Integrated Holding ($213 on Borsa Kuwait), and Shelf Drilling, a UAE company that listed on the Oslo Exchange, at $226mn. 

You can see the original research report on IPOs here.

Kamco's Head of Investment Research is Faisal Hasan, CFA, and his contact details are given on the front page of the firm's reports.