Both uncertainty and fear dominated the global financial markets as a result of the impact of the Corona Virus pandemic during the current year (till the end of May 2020), where most of the financial markets experienced the largest decline since the financial crisis in 2008, and major losses related to economies of the GCC countries after the collapse of oil prices which fell by 50% Of what constituted a painful blow to its economies that depend on crude oil as a main source of their revenues.
The Dow Jones World Index (W1) according to MSCI Indices lost during the period from the beginning of the year till the end of May 2020 nearly -8.9% of its value, and the same index in 2019 gained 25.2%. The decline during 2020 included all Dow Jones indices. The Dow Jones Global Index of the United States decreased by -5.1%, while the comprehensive Dow Jones Index for both Americas declined by -6.5%. The Dow Jones Global Index for Europe decreased by -17.2%, and the same index (excluding the UK) would decrease by -14.3%. Asia’s position was similar to that of the Americas, Dow Jones Global Asia/Pacific Index fell by -11.8%, while Japan’s index fell by -8.1%.
The figures indicate that the weight of the American market and the degree of its impact are very large on the rest of the global markets, and this is evident by the decline in the performance of the Dow Jones Index for the whole world by -8.9%. The decline in the world index (with the exception of USA) was at a higher rate of approximately -15.5%, due to the lower decrease in the Dow Jones Worldwide of the United States. This decline for global financial markets comes after the rise in all indicators in 2019 by 25.2% as mentioned previously.
Chart No. (1) shows the performance of continents according to Dow Jones indices until the end of May 2020, and comparing this performance with what it was at the end of 2019.
Chart No. (2) displays a comparative performance of the growth (or decline) of indices for a selected group of the main financial markets (16 financial markets) during 2020, including the Kuwait Stock Exchange without taking into account exchange rate movements and compared to 2019. Notably indices of all financial markets decreased, and the Kuwait Stock Exchange index decreased according to the AlShall index to finish in the 12th place with a decrease of -20.9% compared to an increase of about 28.9%. The average decrease of the total markets shown in the Chart was about -16.4% at the end of May 2020 compared to an increase of about 19.7% during 2019.
When analyzing the simple (non-weighted) rates of the cash return and (P/E) for the selected global financial markets, we find that the cash return rate for these markets reached about 3.2% as at the end of May 2020, which is higher than its level at the end of 2019 that was 3.1%. As for the average (P/E) for those markets, it reached 14.3 times at the end of May 2020 compared to 15.5 times at the end of 2019, which means that the price drop is higher than the drop of level of profitability.
Chart No. (3) indicates the varied performance of the KSE indices in the selected global markets group, as the (P/E) of the KSE reached 12.5 times holding the 13th place. As for the yield % in Kuwait, it reached about 3.7% when it achieved the 4th position, which is higher than the average of selected global markets.
Chart No. (4) indicates that the average current return on the 16 selected developing markets was about 3.5%, after being 3.2% at the end of 2019. The average (P/E) for the same group was about 12.2 times (about 14.1 times a year) 2019).
The Kuwaiti market ranked 7th among those markets in relation to the current return compared to the 12th at the end of 2019. It ranked 8th out of 16 selected markets according to the P/E compared to 11th position as at the end of 2019.