Despite the great impact of general variables such as the oil market variables and the pressure of geopolitical events, Boursa Kuwait is passing through an exceptional case of abundant liquidity and the likelihood of further increase after its listing on MSCI emerging market index in May 2020. Boursa Kuwait total liquidity during 2019 reached KD 7.847 billion, which is 90.1% higher than the total value for 2018 that was at KD 4.128 billion. However, most of that liquidity went to the companies of the Premier Market (19 companies) that captured about 80.9% of the total liquidity of the Boursa in 2019, leaving about 19.1% for the Main Market (144 companies), and a negligible percentage of 0.008% for the Auction Market (12 companies), which is likely to be canceled at early 2020 and its companies will be transferred to the Main Market.All-Share Market index of Boursa Kuwait had a positive performance in the end of 2019 compared with the end of 2018. It scored 6282.5 points, rising by 1202.9 points or by 23.7% compared to 5079.6 points in the end of 2018. The highest level of index was achieved on 31/12/2019 when it scored 6282.5 points and the lowest level was on 02/01/2019 when it scored 5109.6 points. When we compare the liquidity of year 2019 with 2018, we note that average daily trading value of the Boursa increased by 86.3% and was at KD 31.4 million versus KD 16.8 million for 2018. This increase in liquidity was the result of the recent upgrades of Boursa Kuwait to the emerging markets, the last of which was on S&P Index last September, and on MSCI Emerging Markets Index in May 2020, as the requirements for this upgrade were successfully met.
The market value of the listed companies in the end of the year (175 companies) scored about KD 36.355 billion, an increase by KD 7.168 billion or by 24.6% from its value in the end of 2018. The number of companies whose value increased was 83 companies, while 88 companies recorded varying declines, and value of only 4 companies did not change.
The biggest increase belonged to the banking sector by KD 5.872 billion. The sector was the main target for foreigners’ trading; the telecommunications sector came second by an increase of about KD 702 million. While the market value of basic materials sector decreased by KD 223.3 million. As for listed companies, “National Bank of Kuwait” achieved the highest increase in its market value by KD 1.799 billion compared to its value at the beginning of the year. “Kuwait Finance House” came second by KD 1.783 billion increase and then “Ahli United Bank – Bahrain” by KD 1.208 billion. The banking sector remains the most dominant sector by its market value contribution with about 60.5% of total market value of Boursa companies (more than half of Boursa total market value belong to two banks: NBK and KFH). The telecommunications sector was the second biggest contributor by 9.4%. The two sectors had about 69.9% of Boursa’s market value; their share of its liquidity (measured by trading value) scored 68.7%. The industrial sector with 9% contribution to total market value of the Boursa, and had about 9.1% of its liquidity.
If we take profitability of the first nine months of 2019 as a proxy for profitability of the entire year, we notice an increase by 3.4% in the level of profitability when it scored KD 1.649 billion compared with KD 1.595 billion for the same period in 2018. The number of profitable and common companies in the two years was 124 out of 168 companies whose financial statements were released. Profitable companies achieved about KD 1.704 billion, KD 54.8 million of which represent the share of 44 losing companies.
The banking sector contributed by about 55.7% of the Boursa profits, followed by the telecommunications sector by 12.7% of the profit. 10 sectors out of 12 active sectors contributed the remainder that is 31.6% of those profits. On company level, the largest contributors to Boursa profits were “National Bank of Kuwait”, which achieved absolute profits of about KD 302.2 million, then “Kuwait Finance House” with about KD 190.5 million profits. “IFA Hotels and Resorts” had the highest losses by KD 8.4 million, followed by “Danah AlSafat Food Company” which recorded losses of KD 5 million.
When we analyze the financial performance indicators of listed companies according to the latest available data, calculated on an annual basis, and compare them with the end of 2018 according to the attached table, we notice that the price-to-market multiplier (P/E) rose to about 16.3 times compared to 13.8 times. The price to the book value (P/B) rose to about 1.26 times compared to about 1.03 times and return on equity (ROE) rose to about 7.7% compared to about 7.5%; the return on total assets (ROA) remained at about 1.6% for the two years. Boursa potential performance indicators in 2019 provides positive expectations. Prices of most of the listed companies are still cheap as shares of about 58.9% of the listed companies are sold at a discount ranging between 30% to 80% on their book value. Boursa is achieving a remarkable success for the development procedures and is expected to continue other development procedures in 2020 in addition to the large surplus in liquidity with individuals and institutions as reflected by the inflated size of deposits of the private sector despite low levels of interest on the Kuwaiti Dinar compared with the asset competing the shares (real estate), which is suffering from pressures lowering its prices, which leads to usual exchange between its liquidity in favor of stocks.