Q Kuwait Quarterly Monitor

Transcription

1 Q1 1 Kuwait Quarterly Monitor

2 Asiya Research at a glance Every month, we provide: 1) Macroeconomic outlook. ) Analysis of all countries in Asia and GCC, and some key industrialized economies. 3) Trading developments on all major commodities. Francisco Quintana [email protected] Camille Accad [email protected] Karmen Meneses [email protected] Mahmoud Galal [email protected] Jordi Rof [email protected] Ahmad Al Nafisi [email protected] IMPORTANT DISCLAIMER: The information contained in this report is prepared by the Research Department of Asiya Investments and is believed to be reliable, but its accuracy and completeness are not warranted. Opinions, estimates, and investment strategies and views expressed herein are: 1) based on current market prices, data, and conditions; ) subject to change without notice; and 3) may differ from the opinions expressed for other purposes or in other contexts by other areas of Asiya. Asiya does and seeks to do business in countries covered in its research reports; hence, investors should be aware of potential conflicts of interests that could affect the reports objectivity. Research recommendations do not constitute financial advice nor extend offers to participate in any specific investment on any particular terms. Investors should consider this material as only a single factor in making their decisions. Kuwait Monthly Outlook Q1 1

3 Kuwait: domestic consumption could revive economic growth 3 Indicator 1 1f 17f Real GDP growth (YoY) IP growth (YoY) Exports (YoY) 1... Imports (YoY) Trade balance (% of GDP) Money supply (YoY) Inflation (YoY) Current account (% of GDP) Budget balance (% of GDP) Government debt (% of GDP) KWD:USD Source: Asiya Research on the IMF and Oxford Economics, Economy: business cycle in late contraction. Growth: the economy is suffering from an export led deceleration, but domestic consumption remains steady. Trade surplus continued to narrow as exports contract sharply. Consumption contribution to growth was relatively unchanged in 1. Indicators signal improvement as transactions rose, but household debt is still rising and may begin to be an issue. The property sector gained momentum recently. Credit growth is stable, and banks remain healthy; bank clearings are also improving. Oil production was lower towards the end of last year, as price falls below fiscal breakeven price. Expect some spending cuts. Inflation: dipped further, but house prices still high.. Markets: continues to underperform. Continued to perform poorly in yearly terms and against global equity markets. 3. Risks: slowing global demand & markets. Stressed global markets could negatively impact Kuwaiti financial firms exposed to them. Slump in oil prices due to oversupply could drive the country into a fiscal deficit. Reduced oil demand, especially from G3, could cause growth to stall, but Asian partners could benefit Kuwait greatly. Lack of private credit growth needed for development plan implementation. Kuwait Monthly Outlook Q1 1

4 Kuwait: GDP growth in negative territory for the first time since 9 Growth declined in 1 on sluggish exports. IMF & Oxford Economics see a recovery in the short term. % pt, YoY KW: Nominal GDP, by expenditure Since Government Private consumption Investments Exports Imports Nominal GDP growth 1 KW: Real GDP growth %chg, YoY Since 1 Real GDP growth Oxford Economics Asiya Research IMF Source: Asiya Research on Central Bank of Kuwait, 1. Source: Asiya Research on Oxford Economics and IMF, 1. Kuwait Monthly Outlook Q1 1

5 Kuwait: non oil to contribute to growth positively Non oil sector to remain resilient... as well as in real terms. %pt, YoY KW: Nominal GDP by sector Since %chg, YoY KW: Real GDP by sector Since Oil Non oil Oil Non oil Nominal GDP Source: Asiya Research on Oxford Economics, 1. Source: Asiya Research on Oxford Economics, 1. Kuwait Monthly Outlook Q1 1

6 Kuwait: oil prices way below fiscal breakeven price Global production on the rise, Kuwait output was lowered. Oil prices slumped further. mb per day 3.1 KW: Kuwait oil production Since 1 mb per day 9 USD per barrel KW: KEC vs. breakeven price Since 1 IMF fiscal breakeven oil price Brent crude oil price Kuwait oil production Global oil demand (rhs) 3.1 Sep 1 Nov 1 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1 Mar 1 Sep 1 Jan 1 Feb 1 Mar 1 Apr 1 Jun 1 Aug 1 Sep 1 Oct 1 Nov 1 Dec 1 Jan 1 Source: Asiya Research on DataStream & IEA, 1. Source: Asiya Research on DataStream & IMF, 1. Kuwait Monthly Outlook Q1 1

7 Kuwait: indicators point to better consumption growth 7 Transaction growth using cards rose in Q3. Bank clearings growth rebounded in Q. KD, bn KW: Consumption Since 13 Point of sales ATM Transaction levels Transaction growth (rhs) %chg, YoY 1 1 KD, bn 3 KW: Bank clearings Since 13 %chg, YoY Bank clearings* YoY growth (rhs) Sep 13 Dec 13 Mar 1 Jun 1 Sep 1 Dec 1 Mar 1 Jun 1 Sep 1 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1 Mar 1 Sep 1 Nov 1 Source: Asiya Research on Central Bank of Kuwait, 1. * Settlement transactions between local banks. Source: Asiya Research on Central Bank of Kuwait, 1. Kuwait Monthly Outlook Q1 1

8 Kuwait: property sector may be bottoming out Real estate sales rebounded lately on investment and commercial sales loans accelerated as well. KW: Real estate sales KD, mn Since 1 Commercial sales Apartment & commercial (investment) Residential sales yr average 3 1 KD, mn KW: KCB loan approvals Since 1 Addition & renovation Purchase of existing homes New construction yr average Source: Ministry of Justice & the Savings and Credit Bank, 1. Source: Ministry of Justice & the Savings and Credit Bank, 1. Kuwait Monthly Outlook Q1 1

9 Kuwait: property market recovery coming from commercial sector 9 Commercial sales spiked, while residential sales dipped... since the beginning of 1. KD, mn 3 KW: Property sales Since 9 KD, mn 1 KW: Residential property sales Since 1 Residential sales Commercial sales Residential property sales 3m average Nov 9 May 1 Nov 1 May 11 Nov 11 May 1 Nov 1 May 13 May 1 Nov 1 Nov 1 7 Nov 1 Feb 11 May 11 Aug 11 Nov 11 Feb 1 May 1 Aug 1 Nov 1 Feb 13 May 13 Aug 13 Feb 1 May 1 Aug 1 Nov 1 Feb 1 Aug 1 Nov 1 Source: Ministry of Justice and the Savings and Credit Bank, 1. Source: Ministry of Justice & the Savings and Credit Bank, 1. Kuwait Monthly Outlook Q1 1

10 Kuwait: trade surplus stabilized at a low level as exports keep falling 1 Exports growth improving, but still in contraction. KW: Foreign trade % chg, YoY Since 13 USD, bn 3 Petroleum sales main driver for sluggish exports. KW: Exports KD, bn Since 13 1 Non crude petroleum exports 9 Crude petroleum exports Trade balance (rhs) Export growth Import growth Aug 13 Oct 13 Dec 13 Feb 1 Apr 1 Jun 1 Aug 1 Oct 1 Dec 1 Feb 1 Apr 1 Jun 1 Aug May 13 Aug 13 Feb 1 May 1 Aug 1 Nov 1 Feb 1 Source: Asiya Research on IMF, 1. Source: Asiya Research on Central Bank of Kuwait, 1. Kuwait Monthly Outlook Q1 1

11 Kuwait: trade relation with G3 economies improved 11 Exports to India declined further, but improved across the globe. KW: Contribution to export growth As of August, 1 Imports from advanced markets improved. KW: Contribution to imports growth As of August, 1 ASEAN Other Middle East EU Other Last 3 months Previous 3 months yr Average China Middle East US Last 3 months Previous 3 months yr average China EU Japan India NIE Japan US ASEAN India %pt, YoY NIE %pt, YoY 1 1 Source: Asiya Research on IMF, 1. Source: Asiya Research on IMF, 1. Kuwait Monthly Outlook Q1 1

12 Kuwait: labor market weakening towards end of last year 1 Population growth eased in 1. New jobs growth remained in contraction. Million persons KW: Population Dec 1 May 11 Oct 11 Mar 1 Aug 1 Jan 13 Jun 13 Apr 1 Sep 1 Feb 1 Dec 1 Population Since 1 Population growth (rhs) % chg, YoY Number of jobs, %chg, YoY 1 Note: Includes all residents of the country, as well as Kuwaiti citizens living abroad and maintaining ties to Kuwait through overseas embassies. Labor participation rate Unemployment rate (rhs) Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream, 1.,,,,, KW: Kuwaiti civilian employment Since 1 New Jobs Growth (rhs) 3Q1 Q1 1Q13 Q13 3Q13 Q13 1Q1 Q1 3Q1 Q1 1Q1 Q1 3Q1 % KW: Employment % 7 Since Kuwait Monthly Outlook Q1 1

13 13 Kuwait: inflation fell recently, housing & food inflation rising Inflation rates decelerated further in Q... but housing & food prices continued to rise %chg, YoY KW: Inflation Since 13 KW: Contribution to Inflation As of December, 1 3 Housing Food & bev. HH goods & services Accomodation Education Misc. goods & services Communication 1 Headline inflation Core inflation Health Tobacco Transport Last 3 months Previous 3 months yr average Recreation & culture Apparel % pt, YoY Dec 13 Feb 1 Apr 1 Jun 1 Aug 1 Oct 1 Dec 1 Feb 1 Apr 1 Jun 1 Aug 1 Oct 1 Dec Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream, 1. Kuwait Monthly Outlook Q1 1

14 Kuwait: housing price, the main contributor to inflation, gains slightly 1 Housing prices gradually gaining. Housing weighs the most on the CPI basket. %chg, YoY 1 KW: Inflation, by component Since 1 Recreation & culture % Accomod. 3% Comm. % Transport % KW: CPI basket 1 Apparel 9% Education 3% Health % Misc. goods & services % Food & bev. 19% Dec 1 Jan 1 Feb 1 Housing Mar 1 Apr 1 HH goods & services Jun 1 Aug 1 Food Sep 1 Apparel Oct 1 Nov 1 Dec 1 Housing 9% HH goods & services 11% Misc. goods & services Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream, 1. Note: yr averages are based on the older CPI breakdown. Kuwait Monthly Outlook Q1 1

15 Kuwait: money supply declining while rate raised after Fed hike 1 Policy rate was raised by bps following Fed hike. Liquidity growth dropped as of late. % KW: Interest rates Since 1 % chg, YoY KW: Money supply Since 13 M3 M Lending rate Deposit rate Discount rate 1 Jan 1 Apr 1 Jul 1 Oct 1 Jan 13 Apr 13 Jul 13 Oct 13 Jan 1 Apr 1 Jul 1 Oct 1 Jan 1 Apr 1 Oct 1 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1 Mar 1 Sep 1 Nov 1 Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream, 1. Kuwait Monthly Outlook Q1 1

16 Kuwait: deposit growth declined recently, credit growth rising rapidly 1 Deposit growth plunged in yearly terms but credit growth being more robust. % chg, YoY 1 KW: Private sector activity Since 13 %chg, QoQ KW: Private sector activity Since Credit growth Deposit growth Credit growth Deposit growth Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1 Mar 1 Sep 1 Nov 1 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1 Mar 1 Sep 1 Nov 1 Credit refers to credits facilities to residents" on CBK terms. Source: Asiya Research on DataStream & CBK, 1. Source: Asiya Research on DataStream, 1. Kuwait Monthly Outlook Q1 1

17 Kuwait: household credit kept outpacing corporate credit on yearly basis 17 Corporate loans driven by a strong pickup in installment loans. Trade loans witnessed a strong rise as well. Kuwait Credit Kuwait by Sector, Credit as by of Sector November 1 % of total 7 to % of total loans Total credit to Subsector Subsector Subsector loans Q1 YoY 11 growth Total year credit CAGR to sector (USD, mn) Nov. 1 sector (USD, mn) 1 CAGR Corporate ,7,99 Trade Trade ,9 1,393 Industry. 13.,3 Industry.3 3..,79 Construction..9,17 Construction..3., Agriculture. 1. Agriculture Non bank Financial.3. 7,99 Non bank Real Financial..3 1.,33 Estate.99 7.,1 Real Crude EstateOil & Gas ,79 Crude Public Oil & Gas Services ,13 Other Other ,191,911 Household ,9,971 Consumer Consumer Loans Loans , 3,9 Installment Installment Loans Loans ,7 3, Purchase Purchase of Securities of Securities ,9 9,17 Other Other Loans Loans ,3 1, Total Total ,173 1,31 Source: Asiya Research on Central Bank of Kuwait, 1. Kuwait Monthly Outlook Q1 1

18 Kuwait: household share of total credit continues to increase 1 Credit is largely directed to the household. High credit growth in the oil sector persisted. Crude Oil & Gas KW: Private sector credit breakdown Other As of Nov. 1 KW: Credit growth by sector % As of Nov. 1 Real Estate Household Consumer Loans Installment Loans 3 1 YoY growth year CAGR Trade Purchase of Securities Other Loans 1 Industry 3 Construction Non bank Financial Source: Asiya Research on DataStream, CBK, 1. Source: Asiya Research on CBK, 1. Kuwait Monthly Outlook Q1 1

19 Kuwait: loan to deposit ratio showing signs of strong activity in banks 19 % 1 11 Loan to deposit ratio picked up. KW: Loans to deposits Since 11 Non performing loans ratio was stable in 1. KW: Non performing loans % of total gross loans Since 1 NPL to total gross loans Loans to deposits ratio CBK Loans to deposits* 7 Nov 11 Mar 1 Jul 1 Nov 1 Mar 13 Jul 13 Mar 1 Jul 1 Nov 1 Mar 1 Nov * Equivalent to CBK s Ratio of Net Credit Facilities Portfolio to Deposits. Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream, Kuwait Monthly Outlook Q1 1

20 Kuwait: household debt continues to pick up Household debt growth rising again. Household debt to GDP ratio was already on the rise in 1. KD, billion KW: Household debt Since 1 Household debt Growth (yoy) (rhs) %chg, YoY KD, billion 1 1 KW: Household debt Since 3 % of GDP Household debt % of GDP (rhs) 1 Nov 1 Feb 13 May 13 Aug 13 Feb 1 May 1 Aug 1 Nov 1 Feb 1 Aug 1 Nov 1 Note: Household debt: personal facilities excl. credit for purchase Source: Asiya Research on Central Bank of Kuwait, 1. Source: Asiya Research on DataStream, 1. Kuwait Monthly Outlook Q1 1

21 Kuwait: bank balance sheet levels 1 Private credit is the largest component of banks assets and private deposits are the main liability. KD bn KW: Banking sector assets Since 1 KD bn KW: Banking sector liabilities Since Nov 1 Mar 11 Jul 11 Nov 11 Mar 1 Jul 1 Nov 1 Mar 13 Jul 13 Mar 1 Jul 1 Nov 1 Mar 1 Nov 1 Other CB deposits Interbank deposits Deposits & investments abroad Credit to private Credit to government Local bonds Cash Nov 1 Mar 11 Jul 11 Nov 11 Mar 1 Jul 1 Nov 1 Mar 13 Jul 13 Mar 1 Jul 1 Nov 1 Mar 1 Nov 1 Deposits Non resident Deposits Government Deposits Resident banks Deposits Private sector Own funds Other Source: Asiya Research on Central Bank of Kuwait, 1. Source: Asiya Research on Central Bank of Kuwait, 1. Kuwait Monthly Outlook Q1 1

22 Kuwait: banking sector quality improved Bank liquid reserves was stable in 1. Capital adequacy ratio improved in 1. % KW: Bank liquidity Since 1 % Capital adequacy ratio Since Capital Adequacy Bank liquid reserves to bank assets ratio Minimum CAR Ratio of bank liquid reserves to bank assets is the ratio of domestic currency holdings and deposits with the monetary authorities to claims on other governments, nonfinancial public enterprises, the private sector, and other banking institutions. Source: Asiya Research on World Bank, 1. Source: Asiya Research on DataStream, 1. Kuwait Monthly Outlook Q1 1

23 Kuwait: fiscal spending coming down as oil revenue falls 3 Fiscal surplus narrowed on sluggish revenue... mainly on lower oil revenue. % chg, YoY 1 KW: Fiscal balance Since 11 KD, bn KW: Fiscal revenue KD, bn Since May 11 Aug 11 Nov 11 Feb 1 May 1 Aug 1 Nov 1 Feb 13 May 13 Aug 13 Feb 1 May 1 Aug 1 Nov 1 Feb 1 Fiscal balance moving Q sum (rhs) Revenue Expenditure Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream & IMF, 1. 1 Non oil Oil Total public revenue Kuwait Monthly Outlook Q1 1

24 Kuwait: spending fell, with development projects taking a hit Expenditure dropped in Q 1. KW: Public expenditure KD, bn Since 1 1 Other Development projects Wages & salaries 1 Purchases of goods & services Total expenditure Development project growth stayed sluggish. KW: Development projects % of total Since 3 %chg, YoY % of total expenditure YoY growth (rhs) May 1 Aug 1 Nov 1 Feb 13 May 13 Aug 13 Feb 1 May 1 Aug 1 Nov 1 Feb 1 May Nov May 9 Nov 9 May 1 Nov 1 May 11 Nov 11 May 1 Nov 1 May 13 May 1 Nov 1 Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream, 1. Kuwait Monthly Outlook Q1 1

25 Kuwait: capital spending increasingly in line with budget, but still low Capital spending more in line with budget. KW: Capital spending (actual spending as % of full budget) 7 yr historical average FY 13/1 FY 1/1 3 Capital spending to stabilize at lower growth rate. KW: Public spending %chg, YoY Since FY / Current Capital Total apr may jun jul aug sep oct nov dec jan feb mar Source: Asiya Research on NBK, 1. Source: Asiya Research on NBK, 1. Kuwait Monthly Outlook Q1 1

26 Kuwait: goods & transfers led to narrowing of C/A surplus last year C/A surplus narrowed on transfers & weaker goods and net investment declined further. KD, bn KW: Balance of payments Since 3 % of GDP Goods Net income Transfers C/A Balance (rhs) KW: Financial account KD, bn Since Direct investments Portfolio Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream, 1. Kuwait Monthly Outlook Q1 1

27 Kuwait: KD stabilized against the USD, strengthened against others 7 Kuwaiti Dinar stabilized against the USD KW: Foreign exchange USD per KD Since but appreciated against other currencies. KW: Foreign exchange 1 = 1 Since 13 1 REER NEER Appreciation KWD:USD 1 1 Appreciation Dec 13 Feb 1 Apr 1 Jun 1 Aug 1 Oct 1 Dec 1 Feb 1 Apr 1 Jun 1 Aug 1 Oct 1 Dec 1 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1 Mar 1 Source: Asiya Research on Thomson Reuters, 1. Sep 1 Nov 1 Jan 1 Note: NEER & REER are derived from the Trade Weighted USD Index, and calculated as a weighted average of the price of various currencies relative to the USD. Source: Asiya Research on J.P. Morgan, 1. Kuwait Monthly Outlook Q1 1

28 Kuwait: market performance remained weak Kuwait s stock market sell off persisted. Kuwait market underperformed the world, as well as Asia. KW: Financial markets 1,=1993 Since 13 %chg, YoY, 1 = 1 year ago 1 KW: Market Performance Since 1, 11 7, 3 7, 1, 1 9,, 1 MSCI World, Kuwait Stock Exchange 7 MSCI AXJ Kuwait, 3 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1 Mar 1 Sep 1 Nov 1 Jan 1 Jan 1 Feb 1 Mar 1 Apr 1 Jun 1 Aug 1 Sep 1 Oct 1 Nov 1 Dec 1 Jan 1 Source: Asiya Research on DataStream, 1. Source: Asiya Research on DataStream, 1. Kuwait Monthly Outlook Q1 1

29 Asiya Research Contact Information 9 Asiya Research Asiya Investments KIPCO Tower, floor 31 Khalid Bin Al Waleed Street, Sharq Kuwait Tel: Fax: [email protected] Disclaimer Throughout this presentation ( Presentation ) Asiya Investments, our, we or us refers to the Asiya Group, comprising of a number of group entities including Asiya Capital Investments Company K.S.C.P. ( ACIC ), Asiya Asset Management (Cayman) Ltd. ( AAMC ), Asiya Investments Hong Kong Limited ( AIHK ) and Asiya Investments (Dubai) Limited ( AID ). Asiya Investments does not make any representations or give any warranties in relation to this report or presentation and disclaims all responsibility in relation thereto and for any consequences arising from the recipient investing in preferred shares of the proposed Fund ( Fund ) as a result of matters disclosed hereby. Investment involves risks and possible loss of principal. The value and income derived from investments may go down as well as up. The Fund may utilize short selling, which can result in substantial and possibly unlimited losses. The Fund may employ derivatives and leverage, which involve special risks. The Fund s shares may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on the Fund. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. The recipient should seek independent professional advice before investing in the proposed Fund as the presentation does not purport to provide all of the information the recipient may require to evaluate an investment in the proposed Fund. The information in this presentation is provided as is and as available and the accuracy or completeness of the statements, opinions and views have not been assured or warranted. Actual results could also differ materially. The past investment performance is not indicative of future results of an investment. Neither Asiya Investments, nor their related entities, affiliates or officers guarantee or make any representations as to the success of the proposed investment programme, nor as to the economic return or target return mentioned in this presentation. This presentation shall not constitute an offer to sell or issue or the solicitation of an offer to buy or subscribe for any preferred shares. Any further distribution or reproduction of this document, in whole or in part, or the divulgence of any of its contents, is prohibited. ACIC is an Investment Company regulated by the Capital Markets Authority ( CMA ) and Central Bank of Kuwait ( CBK ) in Kuwait; AAMC is licensed as a Securities Manager and Securities Advisor under Section () of the Securities Investment Business Law (11 Revision) and regulated by the Cayman Islands Monetary Authority ( CIMA ), AID is regulated by the Dubai Financial Services Authority ( DFSA ) and AIHK is a Licensed Corporation (CE Number: AZD39) under Section 11 of the Hong Kong Securities and Futures Ordinance (Cap. 71) ("SFO") for carrying on Type "Advising on Securities" and Type 9 "Asset Management" regulated activities and is regulated by the Securities and Futures Commission in Hong Kong ("SFC"). Pursuant to its license, AIHK provides services to Professional Investors solely and does not hold client assets (both defined under the SFO). AIHK is also a registered investment adviser (CRD Number: 1711) with the US Securities and Exchange Commission ( SEC ). The CMA, CBK, CIMA, SFC, SEC and DFSA have not reviewed and approved this or any other of our marketing documents. The risk factors associated with the Fund are set out in the relevant Fund Prospectus and these should be read and understood before making any investment decisions. A copy of the relevant Fund Prospectus can be obtained from us upon request. If you do not understand the contents of this document you should consult an authorized financial advisor. This Investor Presentation is intended for and is accessible to only eligible investors as defined in the Fund s Prospectus. As such, this Presentation is intended for Professional and Market Counterparty Clients, as defined in the DFSA s Conduct of Business Rules ( COB ) and Professional Investors as defined under the SFO and subsidiary legislation in Hong Kong and therefore is not directed at,and must not,be delivered or relied upon by,a retail client. Kuwait Monthly Outlook Q1 1