Equities off to a flying start in 2019

According to our recently released Monthly Market Review for the month of January, GCC equity markets greeted its investors in celebratory fashion, recording its highest monthly gains in over two years. Investor sentiment was bullish, as the influx of foreign funds, uptick in oil prices and expansionary budget policies are all expected to support corporate earnings growth in 2019. The story was no different in the global markets, as equities continued to be the flavour of the month among investors. The U.S. and Emerging Markets witnessed a reversal in fortunes, putting the misery of 2018 behind them. A recovery in oil prices was also underway, as U.S and China take steps to resolve the trade dispute while Saudi Arabia affirms its commitment to avoid a supply glut.

GCC Markets: Gearing up for additional foreign inflows
Kuwait’s market was off to a strong start in 2019, gaining 2.5%, after disappointing in the fourth quarter of last year. The index performance was led by banking stocks, which were boosted by the decision to lift the foreign ownership cap of 49% on domestic banks. National Bank of Kuwait and Boubyan Bank gained 4.1% and 3.4% respectively for the month. The news of Kuwait Financial House and Ahli United Bank agreeing upon a merger invoked mixed response from shareholders, as Ahli United Bank soared by 13.7% for the month while KFH witnessed its share price fall by 0.5% in the same period.

The S&P GCC index recorded its best start to a year in recent years, gaining 6.8% for the month, boosted by the strength in Saudi stocks. Saudi Arabia outperformed its GCC peers, rising up by 9.4% in January. Qatar, Abu Dhabi, Bahrain and Kuwait also ended the month positively, gaining 4.1%, 4.0%, 2.6% and 2.5% respectively. Dubai market, which was the biggest loser of 2018, witnessed a rise of 1.5%. Oman was the only drag on the index, losing 3.6% for the month. The strength in Saudi equity markets was led by the rally in large cap stocks that are expected to be part of the MSCI EM benchmarks after the inclusion of Saudi Arabia into the Emerging Market indices. Rebound in oil prices, inflow of foreign funds and the increase in capital expenditure projected in the budget were all positive triggers that helped the country’s equity markets. Qatar was the next best performer, extending its positive performance of 2018 into the New Year.

Ezdan Holdings, Al-Rajhi Bank and Samba Financial Group were the top gainers among Blue Chips, rising by 20.4%, 15.7%, and 15.6% respectively for the month.  Samba, Saudi Arabia’s third largest bank by total assets, witnessed an uptick in prices after reporting a rise in yearly earnings. Al-Rajhi Bank’s prices also went up as Malaysia’s Central Bank gave the nod for Malaysian Industrial Development Finance (MIDF), a state-backed Malaysian lender, to conduct negotiations with Al Rajhi Bank over a potential merger deal.

Global Markets: Positivity returns to equity markets
Global equities were off to a flying start in 2019, with several major markets gaining sharply. The month started on a positive note for the U.S. markets, before weak earnings of selected blue chip stocks partially erased the gains in due course of the month. Federal Reserve Chairman Jerome Powell brought cheer to the markets after stating that the Fed will be flexible in its plan of hiking interest rates. The softening stand from the Federal Reserve was perceived positively by the markets. After the announcement, the Dow soared by 3.3% on Jan 4, its fourth biggest single-day rally of all time. The S&P 500 index gained 7.9% for the month while the MSCI World Index gained 7.7% during the same period. Europe showed signs of volatility throughout the month, as the markets keenly observe the developments surrounding the Brexit deal. European markets received a lift after Theresa May’s Brexit deal was rejected by the Parliament. Germany’s DAX index gained 5.8% during the month while UK’s FTSE index closed with gains of 3.6%. Asian Markets remained mixed as China and Japan outperformed India. India’s SENSEX closed with modest gains of 0.6% in January, as concerns over general election weighed on investor sentiment. The MSCI EM index witnessed a sharp rebound, gaining 8.7% in January after shedding nearly 17% in 2018.

Oil markets witnessed a sharp rebound after a subdued close to 2018. Oil prices rose by 15.0% during the month, snapping a three-month losing streak. Volatility in the oil markets refuse to die down as production cut announcements, concerns over demand and fresh sanctions caused the prices to fluctuate. Saudi Arabia’s commitment to production cuts supported the oil price while China’s slowdown in manufacturing sector acted as a minor drag in January. Oil prices surged further towards the close of the month, reacting to the U.S. sanctions on Venezuela’s crude exports.

Global Market Trends – January 2019

Equity	Last Close	MTD%	YTD%
S&P 500	2,704	7.9	7.9
MSCI World	2,028	7.7	7.7
MSCI EM	1,050	8.7	8.7
MSCI FM	944	4.3	4.3
S&P GCC	114	6.8	6.8
Saudi Arabia	8,560	9.4	9.4
Qatar	10,720	4.1	4.1
Abu Dhabi	5,045	2.6	2.6
Kuwait	5,795	2.5	2.5
Dubai	2,568	1.5	1.5
Bahrain	1,391	4.0	4.0
Oman	4,166	-3.6	-3.6
Commodities
IPE Brent	62	15.0	15.0
Gold	1,321	2.9	2.9

Source: Reuters