The global economic turmoil has not spared the Gulf, where most regional exchanges are struggling to break even. The Kuwaiti bourse has been the top regional performer this year, with a 6.6 per cent gain, while the Dubai Financial Market is bringing up the rear with a 15 per cent loss.
Within each country's markets are high-performers, including several telecommunications operators, and stocks that continue to lag. These are the winners and losers around the GCC this year, drawn from among the larger companies, as determined by market capitalisation.They also enjoy ample liquidity. UAE The exit of foreign investors from the UAE bourses hurt most of the country's stocks in the first half but resulted in a focus on a select few equities.
The transport and logistics firm Aramex remains a target of those foreign institutions that have stayed active in the region. Shares of Aramex, which is based in Dubai, are up 17 per cent this year, significantly outperforming other stocks in the country. The limits of foreign ownership are sustaining demand for the stock, said Alfred Fayek, the managing director of the brokerage EFG-Hermes in Dubai.
Etisalat, the UAE's leading telecoms operator, is the second-best-performing stock of the year. Etisalat shares are up 3 per cent since January despite the prospect of increased competition from du. It is no surprise that property stocks remain under pressure, with Abu Dhabi's Aldar Properties and Dubai's Deyaar Development off more than 40 per cent each. Sorouh Real Estate is down 28.5 per cent since January.
Many analysts see the UAE market sell-off as having gone too far. "The UAE is much more discounted than the whole region. It's not the worst-performing market, but it is very well discounted against the whole region," Mr Fayek said. "We don't deserve to be on these levels." Saudi Arabia Second-quarter results in Saudi Arabia have been a bit of a mixed bag, raising some concerns about the pace of recovery in general. But others say the problems were less with the companies' performance than with analyst forecasts.
"The forecasts were too high, which is why many of the results came in line [with] or below expectations," said John Sfakianakis, the chief economist at Banque Saudi Fransi. Etihad Etisalat, or Mobily, has been the best-performing stock on the Saudi Tadawul since January. Morgan Stanley recently increased the Mobily target price by 7 per cent to 70 Saudi riyals (Dh68.55). The stock closed at 53 riyals on Wednesday. "We expect revenues to grow by 22 per cent in 2010 and 15 per cent in 2011," a Morgan Stanley analysis said.
Saudi Electricity gets the silver medal for the first half of the year and has solid prospects. Analysts at NCB Capital said in a report: "We believe that the current market price does not fully factor in the potential earnings growth which will be witnessed starting from the third quarter." Saudi Cable is the worst-performing stock this year, dropping 41 per cent. Rabigh Refining and Petrochemical is the second-worst-performing stock, down 28.7 per cent. And it released disappointing earnings on Wednesday.
Qatar Qatar Navigation, the country's main shipping operator, is the winner on the Qatar index for the year so far. The company has yet to release financial statements for the second quarter, which may price in revenue from the acquisition of Qatar Shippingthis year. Qtel is the second-best-performing stock on the index for the year so far, gaining almost 14 per cent. The telecoms operator is expected to post its first-half results on August 15. The laggards in Qatar come out of the petrochemical sector, as crude oil prices have remained in the US$70 to $80 a barrel range.
Nakilat, or Qatar Gas Transport, is down 23.3 per cent since the beginning of the year. The shipper of liquefied natural gas reported that net income fell 166.5 million Qatari rials (Dh168m) from 179.27m rials in the same period last year. Industries Qatar is the second-worst-performing stock on the exchange, declining by 14.9 per cent. The company is expected to report its second-quarter results on August 4.
Oman Investors responded to BankMuscat's reduced credit losses and higher deposits. Its shares are up more than 23 per cent for the year. The bank reported an 87 per cent jump in net income in the second quarter. Galfar Engineeringhas the worst-performing stock in Oman this year. The company was awarded a 39m Omani rial (Dh371.9m) contract this month to build a harbour in Al Halaniyat Islands, off the southern coast, but that was not enough to lift the stock. It is down more than 18 per cent. The Shuaa Capital analyst Roy Cherry estimates the company will report a net income of 1m rials. Galfar earned 4m rials in the same period last year.
Bahrain Bahrain Telecommunications, or Batelco, did not join the regional trend of telecoms operators outpacing other shares. Its stock is down 3.3 per cent, making it the second-worst performer on the exchange. The company reported this week that second-quarter profit declined by 20 per cent as greater competition in the domestic market eroded sales. Al Salam Bank is down 15.7 per cent since January. The company said net income dropped to 1.3m Bahraini dinars (Dh12.66m) from 2.74m dinars a year earlier.
Ahli United Bank is Bahrain's top stock, up 58.6 per cent since January. The bank, listed on the Bahraini and Kuwaiti exchanges, reported that second-quarter net profit was up 62 per cent from a year earlier to 6.5m Kuwaiti dinars (Dh82.6m). Kuwait Kuwaiti banks are the country's top-performing shares, although analysts are not convinced the trend will continue. "On the banking sector as a whole, we expect full-year results to be slightly dampened," said Naveed Ahmed, an analyst at Global Investment House. "We're not [expecting] an increase in top line because loan growth will remain slow. Interest rates are already very low. What we will see is a decrease in the top line."
Gulf Bank is the top-performing stock in Kuwait so far this year, up 41.6 per cent. Mr Ahmed said, however, it had one of the region's highest ratios of non-performing loans. Boubyan Bank is ahead 21.4 per cent. Agility, which is in a protracted dispute with the US government involving allegations of overbilling, is the worst-performing stock on the Kuwaiti exchange this year, down 32.4 per cent.