GCC Market Review. Global Research - GCC

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1 June GCC Market Review Faisal Hasan, CFA Head of Research fhasan@global.com.kw Phone No:(965) Chandresh Bhatt Assistant Vice President cbhatt@global.com.kw Phone No:(965) Bikash Rout Senior Manager bcrout@global.com.kw Phone No:(965) Abir G. Ahmed Senior Manager agouda@global.com.kw Phone No:(965) Walid S. Mohamed Senior Financial Analyst wsamir@global.com.kw Phone No:(965) Digvijay Tanwar Financial Analyst dtanwar@global.com.kw Phone No:(965) The regional markets continued to rally in the month of May-09. The increase in oil prices during the month had a positive impact on regional markets. The gain in international markets also had a positive impact on GCC markets. All the GCC markets gained during the month with Qatar market gaining a whopping 17.1% during the month. In the last two months Global s DSM Index (Qatar) has gained 33.8% and erased all the losses to record an YTD performance of 0.4% at the end of the month. This recent upturn in the index may signal that investors confidence might be returning, especially after the government s backing which gave strong support to the market. Kuwait market was the second highest gainer for the month by gaining 10.7%. The Kuwait market remained buoyant for the month as all the sectoral indices ended the month in positive territory. On the economy front, the Central Bank of Kuwait (CBK) announced cutting its benchmark discount rate by 50 basis points to 3.00 percent effective Thursday, May 14. Previously CBK reduced the discount rate by 25 basis points to 3.50 percent in April. CBK governor said that a planned 50 basis point interest rate cut was designed to reduce the cost of funding to help encourage growth in non-oil sectors. Table 1: Index Performances MTD Growth YTD Growth Country Measured by Index Close (%) (%) Bahrain Global Bahraini Stocks Index Kuwait Global General Index Oman MSM Index 5, Qatar Global DSM Index Saudi Arabia Tadawul All Share Index 5, UAE NBAD Index 6, Source: Respective Stock Exchanges and Global Research YTD % Growth (10) (20) (30) (40) Comparison of GCC Indices Jan Feb Mar Apr May 2009 TASI BSE (Global Index) MSM KSE (Global Index) UAE (NBAD Index) DSM (Global Index) 1

2 Table 2: Global Recommends.(Further details on Page 22) Company Country/Region Market Value Fair Value Recommendation Raysut Cement Company Oman RO1.093 RO1.561 BUY Bahrain Islamic Bank Bahrain BD0.304 BD0.341 BUY Saudi International Petrochemical Company Saudi Arabia SR18.20 SR20.60 BUY Al Rajhi Banking & Investment Corp. Saudi Arabia SR71.50 SR62.00 REDUCE National Bank of Abu Dhabi UAE AED9.65 AED10.88 BUY Air Arabia UAE AED0.95 AED1.06 BUY Commercial Facilities Company Kuwait KD0.285 KD0.355 BUY Qatar National Bank Qatar QR QR BUY Emirates NBD UAE AED2.85 AED4.80 BUY Abu Dhabi Islamic Bank UAE AED2.95 AED3.63 BUY Sidi Kerir Petrochemicals Company Egypt LE8.90 LE10.60 BUY Jordan Telecom Jordan JD 4.85 JD5.27 BUY Qassim Cement Company Saudi Arabia SR SR BUY Jazeera Airways Kuwait KD0.320 KD0.333 HOLD National Bank of Kuwait Kuwait KD1.160 KD1.060 HOLD Bank Muscat Oman RO0.770 RO0.947 BUY Mashreq Bank UAE AED AED REDUCE Eastern Province Cement Company Saudi Arabia SR46.90 SR70.20 BUY Egypt Economic Review Egypt Qatar Economic Outlook Qatar s economy continued to be one of the fastest growing economies of the region for the last few years. Preliminary estimates from Qatar Statistics Authority revealed a nominal GDP growth rate of 44% for 2008 to surge to a new landmark of QR372.4bn (US$102.3bn). Consequently, GDP per capita was lifted to a record level of US$70,630 in 2008 from US$57,936in Thus, Qatar continued to be one of the top ten wealthiest countries in the world with its GDP per capita exceeding the US$70,000 level. Looking forward, Qatar s economic outlook remains positive despite the current financial turmoil and recessionary trend for the world economy. According to the Deputy Premier and Minister of Energy; Qatar s economy has enough ammunition required to tackle the extraordinary regional and global conditions emerging out of the economic slowdown. Moreover, the Central Bank Governor stated that Gas rich Qatar expects to shrug off the global financial crisis and post healthy economic growth in the range of 7%-9%. However, other estimates points to higher GDP growth rates to be registered for The IMF forecasts 2009 real GDP growth at 15% to 18%, while the Economist Intelligence Unit forecasts real GDP growth of 13.4%. According to such estimates, Qatar is on the way to report the highest economic growth in the world for Such sustainable growth of Qatar is expected to prevail based on pillars of diversification and prudent government policies whether, monetary or fiscal. This is in addition to policies aiming to support private sector participation in development in addition to supporting banking system. Thus, we foresee the Qatari economy to continue its growth journey whether for the hydrocarbon or non oil sectors of GDP. On the oil front, Qatar economy will benefit from the high levels of investment in hydrocarbon sector. Despite the current scenario of declining oil prices, Qatar dependence on LNG exports would be the main driver of growth for the hydrocarbons sector. This is mainly due to the 2

3 planned increase in gas production of around 80% during Qatar is pushing ahead with mega LNG projects to attain its production target of 77mn tons per year. Thus, Qatar inaugurated the world s largest LNG project, Qatargas 2 at Ras Laffan Industrial City. The US$13bn investment project is expected to provide prosperity to the economy for years to come. On the non-oil front, the ongoing government s diversification efforts will support the nonoil and gas sector to increase its contribution to the overall GDP over years. Consequently, major initiatives to diversify the economy will come to fruition in the coming years. Among these initiatives are Qatar Financial Centre, Education City, Qatar Science and Technology Park, Energy City Qatar, Tourism sector, Construction and Real Estate, Sports, Conferences etc. As for the monetary policy, Qatar s central bank expressed its support to the Qatari financial sector as it expressed its willingness to inject liquidity into the banking system if needed in response to the global credit crunch. Moreover, on the exchange rate front, the monetary policy is largely constrained by the Qatari riyal peg to the US$. Such peg will show a sort of support in a scenario of falling global commodity prices and a stronger US$. This is expected to have a good impact on price levels as inflation is expected to fall to one digit level by the end of 2009 after reporting record double digit levels, exceeding 16% during On the financial sector front, Qatar s banking sector appears to be well placed to ride out the global economic downturn supported by the sound economic performance of the country as well as the state support for local banks and solid levels of liquidity. Moreover, in March 2009 the state announced it had completed the purchase of US$1.78bn worth of local bank investment portfolios listed on the Doha Stock Market. Finally, in an assurance that Qatar is pressing ahead full steam with growth plans despite a global recession, the country s prime minister said Qatar has set aside about $150 billion for various projects over the next four years and stands ready to inject funds into local companies hit by the global economic meltdown. Thus looking forward, Qatari banking and financial system is expected to continue its upward journey in line with the whole economy. On the fiscal front, Qatar s budget for emphasized on public spending to help the country weather the adverse effects of the global financial crisis. This is mainly as the key challenge during the ongoing credit crunch is the availability of steady spending in order to attain desired economic growth rate. Thus, the announcement of the new expansionary budget revealed huge allocations for public projects despite the declining oil revenues, thus reflecting the country s keenness to realize the goals set as part of Qatar National Vision According to the vision, Qatar aims to be an advanced society capable of sustaining its development and providing a high standard of living for its population. Qatar has made huge allocations for strategic infrastructure development projects in its budgetary estimates for the new fiscal year to report the second highest expansionary budget of QR94.5bn. The budget is expecting a deficit of QR5.8bn due to the declining oil prices. Such expansionary budget is mainly to support the capital expenditure thus activating the economy and sustaining growth path. Finally, Qatar s outlook is very favorable, with continued strong growth expected to be driven by the hydrocarbon sector, as well as by diversification into higher value-added

4 petrochemicals and other sectors such as real estate, financial and service sector related industries. Market activity. GCC bourses saw 41.7bn shares being traded in the month of May-09 as compared to 39.1bn shares recorded in the previous month. Similarly, the value of shares traded on the bourses increased to US$73.3bn in May-09 as compared to US$53.6bn reported in the previous month. Table 3: Exchange Activity Country Total Volume Traded Total Value Traded (US$) Market Cap (US$) No. of Transactions Bahrain 78,575,940 46,178,599 17,634,721,483 4,101 Kuwait 17,771,937,500 10,493,244, ,154,931, ,514 Oman 817,238, ,474,487 15,387,413, ,163 Qatar 595,917,287 4,184,615,938 77,879,255, ,305 Saudi Arabia 8,590,510,439 51,841,556, ,591,632,279 4,824,754 UAE 13,873,696,716 6,116,407, ,266,848, ,566 Source: Respective Stock Exchanges and Global Research The breadth of GCC stock markets was tilted towards advancers in May-09 as 387 stocks registered monthly gains as compared to 137 decliners whereas 183 stocks remain unchanged. Table 4: Market Breadth Advancers Volume Decliners Volume Unchanged Volume Total BSE 13 57,118, ,576, ,881, KSE ,927,022, ,821,170, ,745, MSM ,614, ,322, , DSM ,468, ,415, , Tadawul 94 7,837,225, ,842, ,442, DFM & ADX 69 12,874,463, ,553, ,680, Total ,054,912, ,429,879, ,084, Source: Respective Stock Exchanges and Global Research

5 May - Country Performances at a Glance Bahrain The Bahraini market carried 133 on its positive momentum for 132 the month of May-2009 as the 131 market closed in green for the third consecutive month. The 130 benchmark Global Bahrain 129 Stock Index was up by 1.31% to end the month of May at points. This is the 127 third consecutive month for 4-May 9-May 14-May 19-May 24-May 29-May Bahraini market to report gains after nine consecutive months of losses between the period June-2008 and up to the end February The Bahrain All Share Index closed the month at 1, points, reporting a monthly gain of 1.64%, however, on an YTD basis the index continued to report losses of 10.08%. Market capitalization of BSE stood at US$17.63bn at the end of May-09 registering an M-o-M growth of 1.64%. Index BSE (Global Index) Sectoral indices performances were positive for most of the sectors during the month of May Heavy weight indices were among the gainers thus moving the market up. Services sector continued its upward trend at a higher pace as it reported the largest gain increasing by 5.39% on top of last month s gain of 0.76%. Commercial banks index followed with 3.47% gain on top of 7.89% growth reported last month. Hotels & Tourism index continued to grow however at a lower growth rate of 0.59%. As for insurance and industrial sectors; both indices stagnated at last month level without change. However, on the declining trend, Investment sector was the only loser for the second consecutive month retreating by 1.05% on top of last month s losses of 5.86%. Market activity continued its upward trend from last month in terms of both value and volume of trade. Volume of shares traded increased by 16.2% as volume of trade reached 78.6mn shares in May-2009 as compared to 67.6mn shares recorded in the previous month. On the other hand, value of shares traded increased significantly by 22.6% on top of 39.7% of growth reported last month to reach US$46.18mn. Combinedly commercial banks and investment sector continued to account for the most of trading volume and value. Commercial banks sector represented 35.1% and 29.4% respectively of total volume and value of trade for the month. Similarly, investment sector accounted for 48.5% and 50% respectively of total volume and value of trade. Gulf Finance House, Innovative investments and Ithmaar Bank were the market leaders in terms of value of trade which stood at US$9.84mn, US$5.88mn and US$5.19mn respectively representing 21.3%, 12.7% and 11.2% respectively of all trading activity. In terms of volume of shares traded Ithmaar Bank, Al Salam Bank and Gulf Finance House were the top three with volume of 20.59mn, 11.48mn and 8.67mn shares traded respectively representing 26.2%, 14.6% and 11% respectively of the total volume of shares traded on the exchange.

6 Market breadth was skewed towards advancers with 13 stocks advancing and 10 stocks declining while the value of 27 stocks remained unchanged (including AUB Class A Preference Shares). Advancers volume at 57.12mn shares was much higher as compared to the decliners volume of 17.58mn shares. This was mainly due to volume of trade of Ithmaar Bank and Al Salam Bank reaching 20.59mn shares and 11.48mn shares respectively. As a result, both shares accounted for 40.8% of trading activity during the month. Nass Corporation BSC was the top gainer for the month with the scrip soaring 68.5%. Other significant gainers during the month were United Gulf Investment Corporation (18.2%), General Trading and Food Process Co. (14.9%) and Ahli United Bank (10%). During the month, General Trading and Food Process Co. announced that its 1Q2009 net profit reached BD461,000 down 62% as compared to the corresponding period of last year. The biggest loser on the exchange was, down 75.16%. Other major losers during the month were Esterad Investment Company (-10.5%), United Gulf Bank (- 9.8%) and Bahrain Cinema Company (-9.5%). The marginal pick up in the market was buoyed by the positive performance of heavy weight banking and services stocks especially Ithmaar Bank, Al Salam Bank, Gulf Finance House, Nass Corporation and Bahrain Telecommunications Co. During the month of May-2009, Al Salam Bank approved a capital increase by a maximum of 250mn shares allocated to Bahraini Saudi Bank shareholders through a maximum of 1:2 share swap. The announcements of first quarter results for companies that reported marginal profits for the first quarter which in view of the continuing deterioration of the global and regional economies, compares favorably with fourth quarter losses. Finally, positive sentiment in other GCC markets especially Saudi market had some positive impact on Bahraini market. On the short term, we anticipate the market to continue the upward trend as positive signals are received from other GCC and international markets coupled with better than expected financial results. Value Leaders (US$) Volume Leaders Gulf Finance House ($) 9,835,939 Ithmaar Bank 20,594,715 Innovative Investments ($) 5,881,340 Al Salam Bank 11,484,615 Ithmaar Bank 5,189,836 Gulf Finance House ($) 8,673,014 Bahrain Telecommunications Co. 4,438,698 Khaleeji Commercial Bank 6,806,781 BBK 3,742,905 Nass Corporation BSC 6,489,860 Corporate News - Arab Banking Corporation (ABC) announced that Standard & Poor s has reaffirmed its counterparty credit ratings at BBB+/Stable/A-2. (Source: Dow Jones Newswires) - General Trading and Food Processing Company (TRFCO) announced that its 1Q2009 net profits reached BD461,000, down 62% when compared to the corresponding period of last year. (Source: Press Release) - Al Baraka Banking Group announced that it will provide mortgage funding for individuals effective the second half of (Source: Dow Jones Newswires)

7 - EGM of Al Salam Bank approved a capital increase by a maximum of 250mn shares allocated to Bahraini Saudi Bank shareholders through a maximum of 1:2 share swap in exchange for the latter s total capital (500mn shares). (Source: Press Release) - Esterad Investment Company announced that its 1Q2009 profit plunged to BD56,000, down 97% from the corresponding period of last year. (Source: Press Release) - United Gulf Bank announced a net profit of US$207.20mn (US$25.31 per share), for the year ended December 31, 2008, a decrease of 6.2% on the US$220.90mn profit for (Source: Press Release) - Ithmaar Bank posted an 88% decline in 1Q2009 profit. Net income was US$3.8mn in the first quarter, the bank announced. That compares with US$32mn in profit in the yearearlier period, according to an earlier financial statement from the bank. (Source: Press Release) - Bahrain Telecommunications Company announced that it has completed the formalities to finalize the acquisition of a 49% stake in S Tel (India). (Source: Dow Jones Newswires) - Following a full-year loss in 2008, Arab Insurance Group (Arig) returned to profitability posting a 1Q2009 net profit of US$1.5mn (1Q2008 was US$3.0mn) backed by strong Technical Result of US$8.6mn across its reinsurance portfolio (Source: Dow Jones Newswires) - Albaraka Turk Participation Bank, a subsidiary banking unit of Albaraka Banking Group announced that it achieved a net profit of TRY30.31mn (US$18.82mn) during the first quarter of 2009, an increase of 13% over the same period of last year. (Source: Dow Jones Newswires) Kuwait During the month of May , the Kuwait Stock Exchange (KSE) continued its bullish trend for the third consecutive month (m-om change) encouraged by positive sentiment towards global economy and 195 increased oil prices. The market remained buoyant for May the month as all the sectoral 8-May 13-May 18-May 23-May 28-May indices ended the month in positive territory. On the economy front, the Central Bank of Kuwait (CBK) announced cutting its benchmark discount rate by 50 basis points to 3 percent effective Thursday, May 14. CBK s last reduced the discount rate by 25 basis points to 3.5 percent in April. CBK governor said that a planned 50 basis point interest rate cut was designed to reduce the cost of funding to help encourage growth in non-oil sectors. The Index Global General Index

8 market registered a gain of 10.7% as Global General Index ended the month at points. This followed with a gain of 8.8% in April-2009 while on a YTD basis the index return turned positive with a gain of 3.6%. The market capitalization reached KD34.7bn at the end of the month, registering an increase of 10.7% as compared to the previous month. The overall trading activity increased during May-2009 compared to the previous month. Volume of shares traded on the bourse grew by 11.4%, aggregating to 17.8bn shares in the month. Value of shares traded on the bourse also witnessed a monthly increase of 4.0%, aggregating to KD3.1bn in the month. Gulf Finance House was the top value leader for the month with 840.4mn shares changing hands at a value KD945.1mn. Al Safwa Group Company was the top volume leader for the month with 1,557mn shares changing hands at a value KD108.2mn. The major gainers during the month were Grand Real Estate Projects (106.2%), Danah Al Safat Foodstuff Co. (78.4%), AREF Investment Group (76.3%), whereas major losers during the month were Kuwait & Middle East Financial Invest Company (-21.4%), Al Kout Industrial Projects Co. (-16.7%), Mubarrad Transport Co. (-13.1%). All the sectoral indices gained during the month with three sectroal indices, namely, Services, Food and Real Estate Indices gained more than 10% during the month. The Services Index achieved the highest gain of 19.7%, while the Banking Index registering the lowest gain of 7.2%. Among the top gainers in the Services sector, Al Safat Tech Group gained 58.2%, followed by Kuwait Cable Vision Company (56.9%), Combined Group Contracting Co. (54.1%). Kuwait Cable Vision Company announced that in June the company will held its AGM and EGM to approve the 66.99% rights issue. In the banking sector, Gulf bank was the top loser for the month with a decline of 9% while Kuwait Finance House gained the most with a gain of 14.0%. Global Investment Index gained 9.4% during the month of May. The stock of AREF Investment Group was the highest gainer in the sector with a m-o-m gain of 76.3% to close at KD Kuwait s AREF Energy Holding Company and its parent company AREF Investment Group are close to selling their joint stake in a non-listed company, and AREF Energy Holding Company is expected to book a profit of nearly KD15mn (US$51.7mn) on the divestment. Among the other major gainers in the sector were and Al Safat Investment Co. which gained 54.8% and 40.6% respectively during the month of May. During the month of May-2009, Global Food Index was the second highest gainer among sectoral indices, with a gain of 16.0% for the month. The sector gain was led by Danah Al Safat Foodstuff Co. with a gain of 78.4% which was followed by Livestock Transport & Trading Co. with an increase of 23.1% for the month. The Global Real Estate Index gained 11.7% during the month. The sector gain was led by Grand Real Estate which was the highest gainer in the market during the month. This was followed by Mabanee Co. and Investors Holding Group Co., in the sector, both gained 32% each for the month. In case of Grand Real Estate, the trading in the company s stocks has been resumed on the Kuwait Stock Exchange as well as on the Dubai Financial Market from May 19, 2009, after the company released its financial statements for the first quarter ended March 31, It seems that the market is on a recovery path taking cue from other regional markets. The increase of oil prices is another major supporting factor driving recovery in the market. The

9 proactive step of further cut in the discount rate will help in gaining confidence into local economy and will translate into an increase in trading activity on KSE. On the back of all such positive developments the market is likely to remain in firm zone. Value Leaders (US$) Volume Leaders Gulf Finance House 957,575,309 Al Safwa Group Company 1,556,560,000 International Financial Advisors 748,133,171 Kuwait Real Estate Company 1,345,260,000 Zain (MTC) 645,772,244 International Financial Advisors 1,280,080,000 The Public Warehousing Co. (Agility) 619,553,543 Gulf Finance House 840,390,000 National Industries Group (Holding) 572,441,059 Investors Holding Group Co. 817,320,000 Corporate News - AREF Energy Holding Company and its parent company AREF Investment Group are close to selling their joint stake in a non-listed company, and AREF Energy Holding Company is expected to book a profit of nearly KD15mn (US$51.7mn) on the divestment. (Source: Zawya) - reported a first quarter 2009 net loss of KD69.5mn compared with a profit of KD34.7mn a year ago. Fee-based business income amounted to KD6mn during the first quarter, down slightly from KD6.8mn in the fourth quarter of (Source: Zawya) - Public Warehousing Co. (Agility) announced that its first-quarter 2009 net profit fell 1.6% to KD36.9mn compared with KD37.5mn in the same period a year earlier. Earnings per share for the quarter rose 3% to fils from fils from the same quarter in (Source: Zawya) - Al Mazaya Holding announced its first-quarter 2009 results. Net profit fell 66% to AED63mn from AED186.5mn a year earlier. Revenue for the period was AED277mn, while earnings per share were fils. (Source: Zawya) - has received the Ministry of Commerce and Industry s approval to issue and sell in a public offering a bond on behalf of Al Arabiya Real Estate Co. worth KD24 million (US$83.3 million). (Source: Zawya) Oman Omani market in line with other GCC markets continued with its uptrend in May, to close the month at 5,500.3 points, a gain of points or 7.2% for the month. The market capitalization of the exchange also increased to US$15.4bn, recording a monthly gain of 7.9% in May-09. Index 5,700 5,600 5,500 5,400 5,300 MSM 5,200 3-May 8-May 13-May 18-May 23-May 28-May 9

10 All sectors were in positive with Industry Index leading the way gaining 15.6% to close at 5,814.8 points. The gain has come on the back of 21.0% gain which the index recorded in the previous month. Industry Index was followed by Banks & Investment and Service & Insurance Indices which gained by 11.2% and 1.2% respectively to close at 7,506.6 and 2,349.3 points respectively. Trading activity increased during the month with the volume of shares traded on the bourse reporting a 21.0% increase and aggregating 817.2mn shares in May-08. The value of shares traded on the exchange too increased by 13.8% on a month on month basis as it amounted to US$629.5mn during the month. Regular market total volume of shares traded increased by 20.8% to 810.0mn shares in May-09 from 670.3mn shares in the previous month and accounted for 99.1% of the shares traded on the exchange. In value terms, the total trading value in the regular market was US$623.4mn or 98.7% of the total trading value. Bank Muscat, Galfar Engineering & Contracting and Al Jazeira Services were the market leader in terms of value of trade which stood at US$69.1mn, US$66.0mn and US$56.1mn respectively whereas in terms of volume of shares traded Al Jazeira Services, Oman & Emirates Inv. (Om) and Galfar Engineering & Contracting were the top three with a total volume of 186.2mn, 44.5mn and 39.0mn shares traded respectively. Market breadth was positive with 50 stocks advancing and 19 stocks declining during the month while the value of 82 stocks remained unchanged. The advancing volume at 774.6mn was much more than the declining volume which stood at 42.3mn for the month. The market leader in terms of volume of shares traded - Al Jazeira Services - was the biggest gainer during the month, gaining by 72.2% to close the month at RO Other significant gainers at the exchange were Financial Services (65.3%), Al Jazeera Steel Product Co. (52.1%), Gulf Investment Services (51.4%) and National Aluminium Products. (50.0%). Al Jazeira in its EGM had earlier in the month approved the 50% reduction of the company s capital. The biggest loser on the exchange for the month was Al Maha Petroleum Products Marketing with the scrip declining by 17.0%. Other scrips falling 10% or more during the month were Omani Packaging (-12.5%), Oman Oil Marketing (12.1%). Galfar Engineering & Contracting (-11.4%) and Muscat National Holding (-11.2%). The improvement in investors sentiments over the past couple of months as well as the impact of international markets gain on GCC markets has resulted in positive performance of Omani markets as well. At the same time, positive results attained by some companies after a devastating fourth quarter of 2008, investors were prepared for the worst and results generally came in at or above expectations for the most part. Considering the sturdy economic activity in the Sultanate and the expansionary budget, we believe Omani companies would be able to post good results and present a case of stock accumulation. In the months to come the market would be able to maintain its upward momentum backed by improving economic fundamentals and support coming in from the government. 10

11 Value Leaders (US$) Volume Leaders Bank Muscat 69,113,242 Al Jazeira Services 186,201,432 Galfar Engineering & Contracting 66,044,521 Oman & Emirates Inv. (Om) 44,537,694 Al Jazeira Services 56,097,163 Galfar Engineering & Contracting 39,025,261 Renaissance Services 54,992,024 Financial Services 37,377,553 Oman Telecommunication 45,171,610 Bank Muscat 35,671,126 Corporate News - Oman & Emirates Investment Holding Company (OEIHC) proposed to sell 60% of the equity stake out of 99.1% currently being held in Dhofar Fisheries Industries Company (DFICO) in favor of a strategic investor, with whom an understanding has been reached recently. (Source: Oman Daily Observer) - Oman National Investment Corporation Holding (ONIC Holding) announced a net loss of RO42.1mn for the finical year ending March 31, 2009 compared to RO27.2mn for the corresponding period of last year. (Source: Times of Oman) - Dhofar Power Company announced that its shareholders are planning to sell a 53.9% stake (10.62mn shares) in the company to Electricity Holding Company, which awaits the approval of the company s lenders and the Capital Market Authority. (Source: Company Disclosure) - Al Batinah International in its EGM approved the increase in the company s capital to RO1.2mn instead of RO1.5mn. In December 2008, the company s EGM has approved a 75% capital reduction to write-off some of its losses. (Source: Company Disclosure) - Oman Telecommunication Company signed a contract worth RO7mn (US$18mn) with the Ministry of Information to provide high-capacity transmission lines to television and radio stations. The contract is for five years. (Source: Times of Oman) - Oman Telecommunication Company posted 1Q09 net profit of RO37.9mn, a 1.3% drop compared with RO38.4mn a year ago. Total group revenue rose 0.6% to RO98.8mn compared with RO98.2mn in the year earlier period. (Source: Dow Jones Newswires) Qatar Qatar market continued with its uptrend for the month of May with the Global s DSM Index gaining by 17.1% in May to end the month at points and closing for the first time in positive territory YTD. The General Index of DSM registered a gain of 1,377.6 points and ended the month at 6,980.8 points, registering a monthly gain of 24.6%. Index DSM (General Index) May 7-May 11-May 15-May 19-May 23-May 27-May 31-May 11

12 Investors wealth in terms of market capitalization increased by QR42.0bn during the month to QR283.5bn, witnessing a gain of 17.4% M-o-M. All the four -sectoral indices ended the month in positive territory. Global Industrial and Global Banking indices led the way with a jump of 31.1% and 20.5% respectively during the month. This was followed by Global Insurance and Global Services indices which gained by 13.7% and 6.1% respectively. For YTD, Industrial index has gained the most with a growth of 12.1% while that of Services was 2.4%. Insurance and Banking indices YTD continue to remain negative with a YTD performance of -8.6% and -8% respectively. Trading value during May-2009 almost doubled, gaining by 91.6% to reach QR15.2bn compared to QR7.9bn during Apri-l2009. Likewise, trading volume increased by 83.2% to reach 595.9mn shares, as against 325.3mn shares, while the number of transactions rose by 53.1%, to reach 254,305 transactions as compared to 166,059 transactions during April2009. Trading activity in terms of value was highest in the Services sector which accounted for 44.3% of the total trading value followed by Banking & Financial sector, which accounted for 37.9%. In terms of volume of trade, Banking and Financial sector with a trading volume share of 45.6% stood as the market leader followed by the Services sector which accounted for 43.7%. Barwa Real Estate Co., Industries Qatar and Masraf Al Rayan were the market leaders in terms of value of trade which stood at US$634.6mn, US$534.9mn and US$421.0mn respectively and representing 15.2%, 12.8% and 10.1% respectively of all trading activity. In terms of volume of shares traded, Masraf Al Rayan, Barwa Real Estate Co. and Qatar Gas Transport Co. were the top three with a total volume of 168.4mn, 66.8mn and 62.7mn shares traded respectively and representing 28.3%, 11.2% and 10.5% respectively of the total volume of shares traded on the exchange. The breadth of the market was positive for the month as 33 stocks gained and 9 stocks declined while the value of one stock remained unchanged. The advancers volume at 584.5mn shares was much higher as compared to the decliners volume of 11.4mn shares. The magnitude of rise in stock prices was high with 14 stocks gaining by more than 20% during the month. Barwa Real Estate Co. was the top gainer with the scrip soaring 56.5%. Other significant gainers during the month were Al Khalij Commercial Bank (37.9%), Industries Qatar (34.6%), Commercial Bank of Qatar (27.7%) and Masraf Al Rayan (27.5%). The biggest loser at the exchange during the month was Aamal Co. (-16.1%) followed by Qatar Cinema & Film Distribution (-16.0%) and Ezdan Real Estate Co. (-11.9%). The magnitude of fall in the other eight decliners varied in between 0-5%. In the last two months Global s DSM Index has gained 33.8% and erased all the losses to record a YTD performance of 0.4%. This recent upturn in the index may signal that investors> confidence might be returning, especially after the government s backing which gave strong support to the market. This along with the economy s strong fundamentals, there is a strong case of market gain in the medium-term. 12

13 Value Leaders (US$) Volume Leaders Barwa Real Estate Co 634,595,847 Masraf Al Rayan 168,383,443 Masraf Al Rayan 534,866,425 Barwa Real Estate Co 66,846,866 Industries Qatar 421,009,491 Qatar Gas Transport Co 62,662,585 Qatar Gas Transport Co 415,026,537 Al Khalij Commercial Bank 45,684,162 Qatar Islamic Bank 297,603,136 Qatar Real Estate & Investment Co 28,970,036 Corporate News - Barwa Real Estate Company announced that its board of directors has approved the sale of its entire shares in the capital of Hassad Barwa to Hassad Food, in addition to the transfer of all present and future agricultural projects of Hassad Barwa to Hassad Food. (Source: Company Announcement) - Qatar Telecom launched a US$5bn global medium term notes program, or GMTN, on the London stock exchange. The funds generated from the notes will be used "for general corporate purposes, including refinancing existing indebtedness. (Source: DSM) - Qatar Gas Transportation Company (Nakilat) is looking to secure a US$940mn loan to back the acquisition of liquefied natural gas (LNG) carriers. The financing is split between a conventional tranche and an Islamic tranche and will also include a subordinated tranche. (Source: Dow Jones Newswires) - Qatar Islamic Insurance Company announced that the company has succeeded the signing of an Insurance Contract Tender for all vehicles of the Ministry of Interior, with a contract value worth QR31.24mn, effective May 31, 2009 and for a period of 3 years, equivalent to QR10.41mn per year. (Source: Dow Jones Newswires) - Qatar Shipping Company announced that its Board of Directors had signed a term sheet with Qatar America Asia Consortium (QAAC) permitting them to carry out due diligence on QCon for purchase of all the shares of that company at a total value of US$110mn. (Source: Company Announcement) - Qatari Diar Real Estate Investment Co., which is owned by Qatar Investment Authority, has acquired 80% of French engineering firm Cegelec. (Source: Dow Jones Newswires) Saudi Arabia Saudi market extended last month rally as it ended higher for the month of May buoyed by the positive performance of heavy weight petrochemical industries stocks. Moreover, investors seemed optimistic enough to help the market move forward. The benchmark Saudi Index Index 6,200 6,100 6,000 5,900 5,800 5,700 TASI 5,600 2-May 6-May 10-May 14-May 18-May 22-May 26-May 30-May 13

14 reported 4.76% growth by the end of May on top of 19.6% of growth reported previous month. All share Tadawul Index stood at 5,893.3 points by the end of May-2009, a gain of points from April. Similarly, total market capitalization increased by 6.89% reaching US$301.59bn as compared to US$282.16bn reported the previous month. The positive sentiment was reflected almost on all indices whereby thirteen sectors out of fifteen ended the month in green, thus, continuing the upward trend from last month. The heavy weight Petrochemical industries sector was the biggest gainer during the month reporting 26.1% growth as the index stood at 4,587.2 points by the end of May The sector performance was mainly affected by investors renewed trust in Saudi Basic Industries Corporation (SABIC). Thus there was an increasing buying interest for the stock that pushed the share price up during the month. Moreover, Saudi Capital Market Authority approved SABIC s capital increase from SR220mn to SR275mn through providing 1 share for every four shares. Hotel & Tourism and Industrial Investment sectors were among the forerunners during May reporting 14.15% gains each. This was followed by Retail and Real Estate Development indices reporting 10.68% and 9.09% of growth respectively. Moreover, the indices of Building & Construction and Multi-investment continued their growth from last month reporting 8.60% and 8.35% gains respectively. Finally, among the gainers this month were Media & Publishing (7.81%), Transport (5.47%), Energy & utilities (5.06%), Agriculture & Food industries (3.58%), Telecom & Information Technology (3.52%) and Insurance (0.99%). On the declining front, the heave weight indices of Cement and Banks and Financial services were the only losers for the month reporting (-6.26%) and (-5.35%) of losses respectively as compared with 20.96% and 25.79% of gains reported for April. The trading activity continued to increase after a declining trend for 1Q Volume of shares traded increased rapidly by 32%, on top of 33% of gains reported last month, with about 8.6bn shares exchanging hands as opposed to 6.5bn shares during April-09. Similarly, value of shares traded registered a hike of 47.7% as it amounted to US$51.8bn during the month. The three heavy weight sectors of Petrochemical Industries, Banking & Financial Services and Telecommunication & IT sectors continued to dominate the market with 17%, 15.6% and 9.5% of the total volume of shares traded respectively. Similarly they accounted for 22.4%, 11.4% and 6.4% of the total value of shares traded respectively on the exchange. In terms of value of trade, threes stocks accounted for more than 23% of total market value for the month of May. Namely; Saudi Basic Industries Corp, Alinma Bank and ZAIN KSA were the market leaders reporting US$6.37bn, US$4.2bn and US$1.8bn respectively. Whereas in terms of volume of shares traded Alinma Bank, Emaar the Economic City and ZAIN KSA were the top three with a total volume of 1.18bn, 595.8mn and mn shares traded respectively. Market breadth was positively skewed with 94 stocks advancing and 30 stocks declining this month while the value of 4 stocks remained unchanged. Likewise, the advancers volume at 7.84bn shares was much higher as compared to the decliners volume of 706.8mn shares. The significant gainer during the month was Al Ahli Takaful Company with the scrip reporting 83.95% of growth. Halwani Bros Co followed with 55.12% growth. Moreover, 14

15 petrochemical and basic industries stocks were among the forerunners during the month with Sahara petrochemical company and SABIC reporting 50.15% and 36.55% growth respectively by the end of the month. The biggest losers on the exchange for the month were insurance companies which had gained significantly during previous months. However most of the listed insurance companies have not started operations yet and the rest have witnessed losses. Allied Cooperative Insurance Group was the biggest loser with the scrip declining by 34.19%. Among other scrips reporting double digits losses during the month were Sanad Insurance & Reinsurance Cooperative Co (-31%) and Gulf Union Cooperative Insurance Co (-18.48%). Finally, Saudi Cement retreated by (-17.83%), while Saudi Hollandi Bank retreated by (-15.99%). The market is still showing good sentiments on the back of oil prices moving higher and showing some stability. In addition, investors are focusing on tentative signs of economic improvement with hope that recession might end in the near future. Finally, good sentiments in other GCC and international markets are having positive impact on the Saudi market. Moving forward, we anticipate that as the economic environment and oil prices get more stable, Tadawul stock indices will maintain its positive momentum. Value Leaders (US$) Volume Leaders Saudi Basic Industries Corp. 6,365,602,494 Alinma Bank 1,183,871,684 Alinma Bank 4,196,165,249 Emaar The Economic City 595,795,438 ZAIN KSA 1,811,954,355 ZAIN KSA 567,121,480 Saudi Arabian Mining Co. 1,776,385,281 Saudi Arabian Mining Co. 454,703,210 Emaar The Economic City 1,600,401,901 Saudi Basic Industries Corp. 372,146,970 Corporate News - Mohammad Al Mojil Group Co. increased its paid up capital by issuing one bonus share for every four shares, raising its total number of issued shares to 125 million, effective 26/05/2009. (Source: Saudi Stock Exchange) - Saudi Industrial Export Company announced that it has signed a six-month MOU with Saudi Specialized Laboratories Company to acquire a 60% stake in the latter, through a share swap. (Source: Dow Jones Newswires) - Saudi Cable Company was awarded a SR130mn contact from the Ministry of Electricity and Water in Bahrain to enhance the electricity transmission network in the country. (Source: Arab News) - Saudi Paper Manufacturing Company announced that it has initiated trial operations at its collection and sorting waste paper plant in Jeddah at a cost of SR10mn. The plant s annual production capacity is expected to reach 35,000 tons. (Source: Dow Jones Newswires) - AGM of Red Sea Housing Services approved the distribution of 35% cash dividend for FY2008. (Source: press release) - Standard and Poor s rated SABB as A/Stable/A-1. It said the ratings reflect the bank s strong and resilient financial performance plus strong asset quality and adequate capitalization. (Source: Dow Jones Newswires) 15

16 - Fitch Ratings affirmed Al-Rajhi Bank s long-term issuer default rating (IDR) at A+ with a stable outlook. Its short-term IDR at F1, individual rating at B/C and support rating at 1. (Source: Dow Jones Newswires) - The Capital Market Authority (CMA) approved Jarir Marketing Company s request to increase its capital from SR300mn to SR400mn through issuing one bonus share for every three shares owned. (Source: press release) - Allied Cooperative Insurance Group announced that it has signed a contract with Netways to link the company s point of sales through a network. (Source: Arab News) - Almarai Company announced that it is planning to merge with Hail Agricultural Development Company through a 1:5 share swap and an additional amount of SR0.5 for every share held in Hail. (Source: Dow Jones Newswires) UAE NBAD Index UAE markets grew by 6.7% 6,400 during the month of May as measured by the benchmark 6,300 NBAD general Index which ended the month at 6, points. With this, the YTD return of the index improved to 7.0% from 0.3% at the end 6,200 6,100 6,000 of previous month. The market capitalization augmented by 5,900 3-May 7.4% or US$9.7bn on m-o-m 8-May 13-May 18-May 23-May 28-May basis to US$141.3bn. Trading activity showed mixed trend as the volume of shares traded declined by 10.8% as compared to last month to about 13.9bn shares while the value of shares traded registered an increase of 8.6% to US$6.1bn during the month. Index The market breadth was positive during the month with 69 advancers and 17 decliners while in case of 45 stocks the prices remained unchanged. Out of the total market volume of 13.9bn shares, about 92.8% of the volume was accounted by the advancers. Arabtec Holding was the market leader in terms of both volume as well as value traded with a total of 1.8bn shares exchanging hands at a total value of US$1.3bn. The stock of appeared in the top five gainers list for the month with a gain of 36.8% to close at AED2.90 per share. Among other stocks with high trading activity in terms of volume were Drake & Scull International, Dubai Financial Market, Emaar Properties and Dana Gas with a monthly volume of 1.5bn, 1.1bn, 1.1bn and 847.5mn shares respectively. Drake & Scull International has been awarded the AED226mn mechanical, electrical and plumbing (MEP) contract for the Kingdom of Sheba development on Palm Jumeirah. This brings the total value of its contracts on the Palm Jumeirah to more than AED1.4bn. The stock of Drake & Scull closed the month with a gain of 14.5%. 16

17 In terms of top value traded stocks, apart from Arabtec, were Emaar Properties, Al Dar Properties, Dubai Financial Market and Sorouh Real Estate with a total value of US$851.6mn, US$570.5mn, US$438.3mn and US$344.1mn respectively. Methaq Takaful Insurance Co. stood out as the top gainer during the month. The scrip soared 106.3% to end the month at AED5.53. Among other significant gainers for the month were Shuaa Capital (69.8%), Emaar Properties (47.7%), Sharjah Cement & Industrial Development Co. (42.4%), and Arabtec Holding (36.8%). The biggest loser on the exchanges for the month was Union Insurance Co. with the scrip declining by 24.8%. The company has reported a loss of AED26.8mn in Q as compared a net profit of AED36.4mn reported in Q Other prominent decliners during the month were Foodco Holdings (-18.2%), Fujairah Building Industries Co. (-13.7%), Alfirdous Holding (-12.3%) and National Marine Dredging Co. (-11.6%). We are of the opinion that UAE markets are likely to remain in firm zone, barring few short term fluctuations, as long-term value buying has already emerged which will arrest any major downfall in the markets. Apart from that the further tone of the market will be mainly dictated by the initial flow of corporate earnings for Q Value Leaders (US$) Volume Leaders Arabtec Holding 1,257,984,648 Arabtec Holding 1,842,290,543 Emaar Properties Co. 851,551,900 Drake & Scull International 1,494,653,754 Al Dar Properties 570,542,002 Dubai Financial Market 1,121,142,113 Dubai Financial Market 438,314,111 Emaar Properties Co. 1,110,766,925 Sorouh Real Estate Co. 344,105,830 Dana Gas PJSC 847,461,178 Corporate News - Emirates Telecommunications Corporation received notification from the Iranian Communications Regulatory Authority that its consortium is no longer the winner of the country s third mobile license. (Source: Khaleej Times) - Amlak Finance announced that its FY 2008 net profit fell 20% to AED241mn, compared with AED301mn a year ago. (Source: Emirates Business 24/7) - Abu Dhabi National Energy Company made a 1Q2009 net profit of AED40mn, a 90% decrease from the same period last year due to declining oil and gas prices and lower exchange rates. (Source: AME Info & Emirates Business 24/7) - Drake & Scull International has been awarded the AED226mn mechanical, electrical and plumbing (MEP) contract for the Kingdom of Sheba development on Palm Jumeirah. (Source: Press Release) - Shareholders of Aramex approved a proposal which will allow foreign investors to hold 49% of the company's shares. Gulf Cooperation Council nationals will be able to own 51% of the company's capital. (Source: GulfBase.com) 17

18 - Aldar Properties sold US$1.25bn of bonds, the first real-estate company in the UAE to issue debt since August. (Source: Reuters & Khaleej Times) - SHUAA Capital is considering buying back a convertible bond issue worth AED1.5bn (US$408.5mn) or altering the price at which the bonds would be converted into shares. (Source: Gulf News) - Tamweel made AED40.76mn (US$11.10mn) net loss in the first quarter as income from properties held for sale slumped and it took provisions. Tamweel booked an impairment provision against financing and investing assets of AED52mn in the three-month period, up from AED6.3mn a year earlier. (Source: Gulf Daily News) 18

19 Economic Developments Bahrain - The total value of Bahraini banks Islamic banking assets increased by 50% in 2008 to US$24.6bn against US$16.4bn in 2007, according to figures issued by Central Bank of Bahrain. (Source: Dow Jones Newswires) - The Central Bank of Bahrain announced that the BD5mn monthly issue of Government Treasury Bills has been oversubscribed by 40%. The bills, carrying a maturity of 182 days, are issued by the central bank, on behalf of the Kingdom of Bahrain. The issue date of the bills is May 24, 2009 and the maturity date is November 22, (Source: Dow Jones Newswires) - Bahrain s central bank confirmed that it has appointed Deutsche Bank, HSBC Bank and Calyon as lead managers for its US$500mn sovereign Islamic bonds, which will be listed on London stock market. (Source: Dow Jones Newswires) Kuwait - Standard & Poor s Ratings Services said that it had affirmed its AA-/A-1+ sovereign credit ratings on the State of Kuwait. The outlook is stable. The ratings on the State of Kuwait are supported by the sovereign s rich resource endowment which, combined with prudent policies, has enabled Kuwait to build very strong external and fiscal balance sheet positions in recent years. (Source: Reuters & Al-Watan Daily) - Kuwait s revenue from oil exports dropped 55 percent in the first quarter of 2009 from the year earlier period as oil prices tumbled, while state expenditure soared 163 percent. The world s fourth-largest oil exporter earned KD2.3bn (US$8bn) from oil exports in the first three months of 2009 compared with KD5.1bn a year earlier, according to the central bank. Its oil export revenues accounted for 89.5 percent of total revenues in the first quarter. (Source: Reuters) Oman - Oman s inflation during the first-quarter of 2009 eased to 7.9% from 12.4% in the fourthquarter of last year, according to official statistics. Food price inflation eased to 21.2% in the first-quarter from 40.2% in the last quarter of (Ministry of National Economy) - The total passenger traffic (including transit and transfer passengers thorough Muscat International Airport has increased by 5% to 1,355,690 passengers for the four month period ending April 2009 compared to 1,288,612 passengers for the same period of Arrival passengers increased by 4% to 555,410 passengers while departing passengers increased by 9% to 519,787 passengers. The increase in arrival and departure traffic into Muscat International Airport is attributed to the increase of the number of flights to most of the airlines operating into Muscat International Airport. Addition to the increase in the number of Omani Air flights by almost 44% comparing the months of April for the years 2008 and (Source: Oman Daily Observer) 19

20 Qatar - Qatar's government will spend US$4.1bn on acquiring the real-estate portfolios of nine local banks to boost the domestic real-estate sector. The selling price has been set according to the book value of the real-estate investment at a ceiling of QR15bn. The initiative will enable local banks to pursue their vital role in the national economy and push forward the development process. (Source: Dow Jones Newswires) - The Qatar construction sector is poised for a 17. 6% growth in 2009, as gas revenues continue to provide the country with ample funds to re-invest into infrastructure development and construction projects, according to organizers of fourth Qatar International Real Estate & Investment Exhibition (QREX) (Source: The Peninsula) Saudi Arabia - Saudi Public Transport Company announced that it has entered an alliance with the General Investment Authority to evaluate and develop a service that will link the economic cities of the Saudi Kingdom. (Source: Dow Jones Newswires) - Tihama Advertising & Public Relations Company signed a contract with Netherlandsbased public relations firm Promax to act as its representative in the kingdom. Under the contract, Tihama will be allowed to use the brand name of Promax which has a global network of more than 128 offices. (Source: Dow Jones Newswires) UAE - The United Arab Emirates has decided to withdraw from GCC plans for monetary union throwing the long awaited project into doubt. The UAE would keep its Dirham currency pegged to the U.S. dollar and monetary policy would otherwise remain the same, Central Bank Governor Sultan Nasser al-suweidi said according to state news agency WAM. GCC leaders agreed earlier this month that a monetary council for the six-member GCC - a precursor to a central bank - would be located in Riyadh, in a step toward creating the common currency. UAE s withdrawal is seen as an expression of the country's unhappiness at not being chosen to host the GCC Central Bank. (Source: The National) - Non-oil exports from Dubai and other emirates are lowering the contribution of hydrocarbons to the UAE's GDP, making the country less susceptible to fluctuations in crude prices. An Oil Price Vulnerability Index released by Standard & Poor's shows that the UAE is much better placed than Saudi Arabia and Bahrain, which rely heavily on oil for their income. (Source: Emirates Business 24/7) 20