Markaz: Kuwait equities deliver positive performance in Q1 2025

Al Bawaba

07-04-2025

Kuwait Financial Centre 'Markaz' released its Monthly Market Review report for March 2025. Kuwait equity market has been the top performer among GCC markets in Q1 2025, gaining 9.7% for the quarter. Following five consecutive months of positive performance, Kuwait markets were slightly negative in March 2025. Kuwait's All Share Index declined by 0.3%, with mixed performance across sectors. Healthcare and insurance were the top gainers, rising by 9.9% and 3.3% respectively. The banking sector index gained 0.7% for the month. Among banking stocks, Burgan Bank and Commercial Bank of Kuwait were the top gainers, with a monthly return of 6.2% and 5.3% respectively. Commercial Bank of Kuwait's net profit for FY 2024 increased by 41.4% y/y due to higher loan loss recoveries, increase in net interest income and fee income. Among Premier market stocks, Integrated Holding Company and Jazeera Airways were the top gainers, rising by 8.6% and 6.9% respectively for the month. Integrated Holding recorded a net profit of KD 6.88 million for FY 2024, an increase of 67.7% y/y. Steady increase in demand for equipment services and reversal of provision for doubtful debt due to realization had contributed to the rise in profit.Kuwait has passed the long-awaited public debt law, which would enable the country to raise debt in the international markets. The new law sets the ceiling for public debt at KD 30 billion (USD 97.4 billion) and the ceiling for maturities of issued financial instruments at 50 years. In its budget for FY 2025/26, in the light of lower oil prices (estimated at USD 68/barrel) and OPEC+ production cuts, the country has estimated a budget deficit of KD 6.3 billion. With the earlier debt law expiring in 2017, the country has been drawing from its General Reserve Fund to fund its deficit. The new law would enable it to finance the deficit by raising debt from international markets. Kuwait's CPI rose by 2.49% y/y in February 2025, remaining steady compared to 2.5% y/y increase in January 2025. The food and beverages segment continued to be the major driver, rising by 5.23% y/y. The S&P GCC Composite index declined by 1.1% in March 2025 with all GCC markets in red weighed by trade war concerns and geopolitical tensions. Saudi equity index declined by 0.7% during the month. ACWA Power and Saudi Aramco had declined by 7.6% and 1.3% respectively for the month. Saudi Aramco's net profit for FY 2024 declined by 12.4% y/y to USD 106.2 billion on the back of lower oil prices. Saudi Capital Market Authority has approved the listing of flynas, Saudi Arabia's budget airline, making it the third such listing from an airline company in GCC, after Air Arabia (UAE) and Jazeera Airways (Kuwait). Abu Dhabi's equity index declined 2.0% in March 2025, amid broad-based declines. Dubai's equity index declined by 4.2% for the month. Emirates NBD and Dubai Islamic Bank declined by 8.6% and 7.2% respectively for the month. Qatar's equity markets lost 2.0% for the month, despite positive corporate earnings and a 7.4% rise in natural gas prices during the month. Qatar's listed companies' net earnings increased by 8.7% y/y in 2024.S&P has revised up Saudi Arabia's rating from A to A+, citing ongoing social and economic transformation. The country's real GDP grew by 4.4% y/y in Q4 2024, with non-oil GDP rising by 4.6%, and oil GDP rising by 3.4%. According to the Central Bank of UAE, the country's real GDP has grown by 3.9% y/y in 2024 on the back of strong performance of sectors such as tourism, transportation, financial services, construction and real estate. It is projected to grow at 4.7% y/y in 2025 and 5.7% y/y in 2026 on the back of heavy investments in projects, unwinding production cuts by OPEC+ and implementation of reforms.Global markets were negative during March 2025. MSCI World and S&P 500 indices declined by 4.6% and 5.8% respectively. Concerns over ongoing tariff announcements and economic weakness pressured markets during the month. Following levy of tariffs on imports from Canada, Mexico and China, U.S President Trump announced 25% levy on all imported automobiles. This has in turn raised concerns over the country's growth prospects with many market participants, such as Goldman Sachs and Morgan Stanley lowering their GDP forecasts for 2025 to 1.7% (down from 2.2%) and 1.5% (down from 1.9%) respectively. The U.S Fed has revised its expectation for inflation upwards to 2.7%, up from 2.5%, while revising its outlook on GDP growth downwards to 1.7%, from 2.1%. The MSCI EM index gained 0.4% during the month with 0.4% gain in Chinese equities and 5.8% gain in Indian equities. Chinese equities were supported by the government's pledge for stronger fiscal and monetary support for the economy while favorable economic data such as declining inflation have supported Indian equities.U.S inflation stood at 2.8% y/y in February 2025, a slight decline from the 3.0% y/y reading in January 2025. Food prices had increased by 2.6% y/y. On a monthly basis, CPI increased by 0.2%, driven by shelter costs, which accounted for more than half of the increase. The U.S. labor market added 151,000 jobs in February, up from 125,000 jobs added in January. While sectors such as construction and healthcare have reported gains, there have been about 10,000 job cuts by the Federal government. With the U.S government looking to cut spending, it is widely expected that such job cuts would continue in the upcoming months.The yield on the 10-year US treasury notes remained volatile and closed at 4.23% at the end of March 2025, down by 1 bps compared to the previous month. While the Fed's expectation of lower interest rates pressured yields, concerns over slower economic growth and higher inflation on the back of tariff imposition held up yields. During the month, U.S Fed kept rates unchanged at 4.25%-4.50% and maintained its expectation of lowering interest rates by 50 bps in 2025. Oil (Brent) prices closed the month at USD 74.7 per barrel, up by 2.1% during the month. While oil prices were weighed by OPEC+'s decision to hike output by 138,000 barrels per day from April 2025, concerns over tightening of supply supported prices during later part of the month. The U.S has imposed tariff on countries that purchase oil and gas from Venezuela, citing the country's lack of progress on handling migrant returns and electoral reforms. The country has also placed restrictions on Iranian oil trade. Gold prices closed at USD 3,084, gaining 9.3% during the month and 19.0% during Q1 2025 on the back of safe haven demand amid persistent tariff concerns and expectation of lower interest rates. Recent levy of trade tariffs by U.S and retaliatory tariffs by countries like China present a downside risk to global economic activity. Such tariffs and efforts to reduce Federal spending in the U.S have increased uncertainty around the country's growth prospects and inflation. These factors are likely to continue to impact GCC equity markets as well. However, with OPEC+'s planned unwinding of production cuts, the likely improvement in oil GDP and continued implementation of reforms could render some support to markets.
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