ALSHALL Weekly Economic Report

Volume 23 Issue 6 10th February 2013

This Week 1. Financial and Monetary Statistics December 2012 2. Trading Features at Kuwait Stock Exchange January 2013 3. The Comparative Performance of Selected Stock Markets 4. Gulf Bank Financial Results FY 2012 5. The Weekly Performance of Kuwait Stock Exchange Prepared by Economic Research Unit ALSHALL Consulting Co. Salhiya Sahab Tower Floor 9 Kuwait Tel: + 96522451535 Fax: +96522422619 Email: info@alshall.com Web site: www.alshall.com Twitter: @ALSHALL_Con

1. Financial and Monetary Statistics December 2012 In its periodical statistical bulletin for December 2012, as published on its website, the Central Bank of Kuwait (CBK), indicates that balance of total public debt instruments dropped by KD 218 million to reach KD 1.755 billion in the end of 2012 (KD 1.973 billion in the end of 2011). Public debt instruments comprise of long-term treasury bonds with a balance of KD 1.755 billion (KD 1.848 billion in the end of December 2011) and treasury bills with a zero balance (KD 125 million in the end of December 2011). The average interest rate on 1-year treasury bonds was 1% (since August 2012). Local banks capture about 96% of total public debt instruments (95.6% in the end of December 2011). As such, total local public debt amounted to about KD 1.755 billion, equal to 3.7% of the nominal gross domestic product (GDP) for 2012, estimated at about KD 47.7 billion. The bulletin also stated that total credit facilities to residents from local banks amounted to about KD 26.895 billion, which represents about 56.9% of local banks total assets, increasing noticeably by about KD 1.284 billion from its level in December 2011, a growth rate of 5% for 2012. Growth rates of total credit

facilities scored 19.9%, 26.3%, 34.8%, 17.5%, 6.1%, 0.4%, and 1.6% in the years 2005, 2006, 2007, 2008, 2009, 2010, and 2011 respectively. Personal facilities amounted to about KD 10.059 billion, forming about 37.4% of total credit facilities (about KD 8.947 billion in the end of December 2011). Within personal facilities, Installment loans reached about KD 6.036 billion (about 60% of total personal), and KD 2.706 billion for stocks purchases (about 26.9% of total personal facilities). Consumer loans amounted to about KD 1.036 billion. Credit facilities for real estate amounted to about KD 7.131 billion (26.5% of total credit facilities) vis--vis KD 6.756 billion in December 2011, while loans for the trade sector scored KD 2.478 billion, or 9.2% of the total, (about KD 2.307 billion in the end of December 2011). Loans for financial institutions sector, other than banks, reached about KD 1.905 billion (7.1%) vis--vis KD 2.380 billion in the end of December 2011. The bulletin also indicates that total deposits at local banks scored KD 33.375 billion, representing about 70.6% of local
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Volume 23 Issue 6 10th February 2013

banks total liabilities, and increasing by about KD 2.736 billion (or 8.6%) from its level in the end of December 2011. Share of private sector clients thereof in Kuwaiti Dinar in the comprehensive definition, including major Institutions like the Public Institution of Social Securities -excluding the government- amounted to about KD 28.420 billion, or 85.2% of total deposits at local banks, and deposits of these clients in Kuwaiti Dinars amount to about KD 26.148 billion, or about 92%, the equivalent of KD 2.272 billion in foreign currencies for the private sectors clients, too. As for average interest rates on customer time deposits of clients, both in KD and US$, compared with the end of December 2011, the bulletin states that it continued its drop on the two currencies; however, the difference on clients term deposits is still in favor of the Kuwaiti dinar, which scored 0.411 points for 1-month deposits, about 0.498 points for 3-month deposits, about 0.545 points for 6-month deposits and about 0.520 points for 12-month deposits vis--vis 0.642 points for 1-month deposits, 0.700 points for 3-month deposits, 0.783 points for 6- month, and 0.842 points for 12-month deposits in the end of 2011. The monthly average exchange rate of the Kuwaiti dinar versus the US dollar for December 2012 scored 281.289 fils per US dollar, declining by about 1.4% compared with the monthly average for December 2011, when it scored 277.407 fils per one US dollar.

2. Trading Features at Kuwait Stock Exchange January 2013 Kuwait Clearing Company (KCC) issued its report titled Trading Volume According to Nationality and Category for January 2013 published on KSE website. The report indicated that individuals still form the largest trading group, forming 59.1% of total value of sold shares (about 54.7% for January 2012) and 56.8% of total value of purchased shares (52.8% for the same period 2012). Individual investors sold shares worth KD 396.188 million and purchased shares worth KD 381.005 million, thus their net trading is selling by about KD 15.183 million. The change in individuals contributions upwards means increase in the characteristic of individuals transactions at KSE and a relative decline in corporate contributions, which is a negative development. Corporations and companies sector captured 20.7% of total value of purchased shares (about 21.9% for the same period 2012) and 19% of total value of sold shares (19.3% for the same period 2012). The sector purchased shares worth KD 138.796 million and sold shares worth KD 127.711 million, resulting in a net trading -buying- balance of about KD 11.085 million. The third contributor to the markets liquidity is clients accounts (portfolios) sector, which formed about 16.7% of total value of sold shares (19.3% for the same period 2012) and 14.2% of total value of purchased shares (20.8% for the same period 2012). The sector sold shares worth about KD 111.977 million and purchased
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Volume 23 Issue 6 10th February 2013

shares worth KD 95.578 million, resulting in a net trading -more selling- balance of about KD 16.398 million. The last contributor to liquidity is investment funds sector which captured 8.3% of total value of purchased shares (4.5% for the same period 2012) and 5.2% of total value of sold shares (6.8% for the same period 2012). This sector purchased shares worth KD 55.611 million, and sold shares worth KD 35.115 million, resulting in a net trading -buying- balance of about KD 20.496 million. KSE continues to be a local market, with Kuwaiti investors forming the largest group of traders therein; they sold shares worth KD 616.722 million capturing 91.9% of total value of sold shares (89.4% for the same period 2012), and purchased shares KD 610.750 million, thus capturing 91% of total value of purchased shares (90.8% for the same period 2012), ending with a net trading -selling- balance of about KD 5.971 million. Percentage of Other investors, out of total value of purchased shares, scored 6.7% (6.3% for the same period 2012) worth about KD 45.164 million vis--vis KD 37.243 million value of sold shares, i.e. 5.5% of total value of sold shares (5.8% for the same period 2012), resulting in a net trading -buying- balance at about KD 7.921 million. Percentage of GCC investors out of total value of sold shares scored 2.5% (4.8% for the same period 2012) worth KD 17.026 million vis--vis 2.3% or KD 15.076 million, value of purchased shares (2.9% for the same period 2012) thus
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ending with a net trading -selling- balance of about KD 1.950 million. Relative distribution among nationalities remained unchanged: 91.5% for Kuwaitis, 6.1% for traders from other nationalities, and 2.4% for GCC investors vis--vis 90.1%, 6.1% and 3.9% respectively for Kuwaitis, other nationalities and GCC investors in January 2012. This implies that KSE remains to be a local market with more investors from foreign investors than from GCC countries. Individual, and not corporate, trading prevailed and is increasing. Active trading accounts increased by 2.3% from December 2012 to January 2013 (0.5% rise from December 2011 to January 2012). As such, active trading accounts in the end of January 2013 reached about 15,837 accounts, about 6.5% of total accounts. 3. The Comparative Performance of Selected Stock Markets Performance of the selected markets in January 2013 was good, as they all (14) achieved positive performances compared to the closure of 2012 with Dubai market taking the lead by achieving two digits, i.e., more than 10%. While it seemed logical for all indices to move up due to the good news in the end of the year in Europe, USA, China and Japan, the Emirates markets had their own justifications for the positive performance. For Dubais market taking the lead among the sample markets and with a wide margin (about double the market that came after) was due to the improved global market environment on the one

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Volume 23 Issue 6 10th February 2013

hand, as it indicates improved trade, tourism and direct investments. On the other hand, additional support to Dubai came from improved indices of its real estate sector, the core of its crisis. Dubai market index (DFM) increased in January by 16.3%, Abu Dhabi market (ADX) came next with a 9.5% rise. As a result of the Japanese elections, the talk about the new politicians breaking the commitment to Japans conservative particularity, and the moving ahead with quantitative easing polices and stimulating growth at the expense of inflation, Nikkei index jumped by about 7.2% in one month. It is difficult to provide a reading from analyzing the performance of one month. However, reading the performance of the fourteen markets implies lack of discrimination between global developed markets, emerging markets, and the seven GCC markets. While Dubai and Abu Dhabi markets took the lead in positive performance, Muscat and Bahrain markets came at the bottom in performance, albeit positive. The other three markets, i.e. the
GCC & World Stock Markets 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Dubai Financial Market Abu Dhabi Securities Exchange Nikkei 225 (Japan) FTSE 100 (UK) DJI (USA) Kuwait Stock Exchange (Price Index) SSE Composite (China) Qatar Exchange Saudi Stock Exchange Kuwait Stock Exchange (Weighted Index) CAC 40 (France) BSE SenSex (India) DAX (Germany) Bahrain Bourse Muscat Securities Market 31/12/2011 1,353.4 2,402.3 8,455.4 5,572.3 12,217.6 5,814.2 2,199.4 8,779.0 6,417.7 405.6 3,159.8 15,454.9 5,898.4 1,143.7 5,695.1

Qatari, the Saudi and the Kuwaiti -weighted index- came in the middle i.e. between the seventh and ninth. The German and the Indian markets came close to the bottom, i.e. the 12th and 11th positions, which is justifiable because their performance was the best in 2012, the Japanese market built on its momentum in January due to the aforementioned developments. It seems February will be a month for the markets to reinforce their positive performances, as negative news during the month are not anticipated. It is assumed this optimistic feeling will reinforce the strength of the oil market as well. Therefore, the regional markets are supposed to continue to show positive performances. What might represent a split between the performance of the global and regional markets are the political events, as conditions in all the Arab region and its neighborhood are politically active, and the probability of a surprising development occurring during February, although week, is possible.

Comparative Performance of 14 Selected markets January 2013

Indices 31/12/2012 1,622.5 2,630.9 10,395.2 5,897.8 13,104.1 5,934.3 2,269.1 8,358.9 6,801.2 417.7 3,641.1 19,426.7 7,612.4 1,065.6 5,760.8 change % 19.9% 9.5% 22.9% 5.8% 7.3% 2.1% 3.2% -4.8% 6.0% 3.0% 15.2% 25.7% 29.1% -6.8% 1.2% Indices 31/01/2013 1,887.6 2,881.8 11,138.7 6,276.9 13,860.6 6,245.1 2,385.4 8,724.8 7,043.6 432.2 3,732.6 19,895.0 7,776.1 1,085.1 5,799.8 change % Jan 2013/ Dec 2012 16.3% 9.5% 7.2% 6.4% 5.8% 5.2% 5.1% 4.4% 3.6% 3.5% 2.5% 2.4% 2.1% 1.8% 0.7%

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Volume 23 Issue 6 10th February 2013

4. Gulf Bank Financial Results FY 2012 The Gulf Bank announced its results for the fiscal year ending December 31, 2012 which indicate that the bank achieved profits, after deducting due taxes and the Board of Directors remunerations, of about KD 30.9 million (KD 30.6 million for 2011), a 0.9% rise equal to KD 267 thousand. Net profit margin dropped to 12.9% (13.6% in 2011) due to the rise in operational revenues by 5.5%, which is higher than the rise in net profit which scored 0.9% as we mentioned above. The banks financial statements show that the main reason for the slight rise in profits despite the rise in operational revenues is due to a drop in recoveries loans from KD 10.7 million in 2011 to written off debts worth KD 5.2 million in 2012. The decline in the value of available-for-sale investments scored about KD 11.9 million, a rise by KD 4.2 million, or 54.9% (KD 7.7 million in 2011). The banks total operational revenues increased by KD 12.4 million (5.5%) to KD 238.1 million (KD 225.7 million in the same period 2011) due to the rise in the item of net gains from dealing in foreign currencies and derivatives by KD 10.3 million, 64%, to KD 26.4 million vis--vis KD 16.1 million for the same period 2011. Item of interest income rose by KD 3.8 million (2.2%) and scored KD 176.2 million (KD 172.5 million for the same period 2011). Item of realized revenues from selling available-for-sale investments decreased by KD 1.9 million,
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or 27.1%, to KD 5.3 million (KD 7.3 million in 2011). Average paid interest cost scored 1.4% in 2012 (1.6% in 2011). The received average interest rate scored 4.7% (4.5% in 2011). Total interests expenses retreated by 12% while total revenues rose by 2.2% as mentioned above rising the net interests revenues by 11.1% to KD 117.7 million (KD 105.9 million in 2011). Figures also indicate a slight rise in liquidity risk percentage to 104.2% up from 103.5% in 2011. Interest risk rate scored 0.885 times which is slightly less than 0.910 times in 2011. On the other hand, the banks total assets rose by KD 60.8 million or about 1.3% to KD 4846.7 million compared to KD 4785.9 million in 2011. Cash and short-term funds rose by KD 112.7 million to KD 483.2 million (KD 370.5 million in 2011). Item of loans and advances to the banks increased by 171.3%, about KD 58.5 million. These assets scored KD 92.6 million (KD 34.1 million in 2011). Available-for-sale investments also went up by KD 16.3 million to KD 122.4 million (KD 106 million in 2011). Government assets retreated by KD 133.1 million to KD 714.6 million (KD 847.7 million in 2011). Loans and advances to customers also retreated by KD 11.6 million to KD 3322.5 million in 2012 (68.6% of total assets) vis--vis KD 3334.1 million in 2011 (69.7% of total bank assets) coupled with a rise in capital

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Volume 23 Issue 6 10th February 2013

risk (financing) percentage and scored 10.3% up from 7.2% in 2011. Results of analyzing financial statements indicate that average return on equities (ROE) scored about 7% (7.3% in 2011). Return on assets index (ROA) scored 0.64% (0.65% in 2011). Return on capital (ROC) index scored 8.5% this year (12.2% in 2011). The bank announced

plans to distribute 5% bonus shares. In 2012 the bank maintained the earning per share (EPS) of 2011 (12 fils). Price multiplier/per share profit (P/E) scored 46.7 times which is higher (worse than) its counterpart in 2011 when it was at 42.5 times. Price Multiplier to Book Value (P/B) scored 3.4 times which is worse than its counterpart value of 3 times in 2011.
2012 (Thousand KD) 4,846,658 439,750 30,887 238,149 116,736 90,526 Ratios 0.64% 7.0% 8.5% 9.1% 46.7 3.4 2011 (Thousand KD) 4,785,895 420,487 30,620 225,720 118,033 77,067 0.65% 7.3% 12.2% 8.8% 42.5 3.0 Change Value % 60,763 1.3% 19,263 4.6% 267 0.9% 12,429 5.5% -1,297 -1.1% 13,459 17.5%

Total Assets Equity Net Income Total Operating Revenues Total Operating Expenses Provisions and other Expenses Return on Average Assets Return on Average Equity Return on Average Capital Equity as percentage from Assets Price-Earnings ratio (P/E) Price-to-Book ratio (P/B)

5. The Weekly Performance of Kuwait Stock Exchange The performance of Kuwait Stock Exchange (KSE) for the last week was mixed, where all the indices showed an increase, while the general index showed a decrease. AlShall Index (value weighted) closed at 448 points at the closing of last Thursday, showing a decrease of about 6.5 points or about 1.4%, and an increase of 9.8 points or about 2.2% compared to the end of 2012.
The following tables summarize last weeks performance of KSE
Description Working days AlShall index (41 Companies) KSE index Value Trade (KD) Daily average (KD) Volume Trade (Shares) Daily average (Shares) Transactions Daily average (Transactions) Week 6 07/02/2013 5 448.0 6,288.7 208,407,131 41,681,426 3,312,583,767 662,516,753 43,024 8,605 Week 5 31/01/2013 5 454.5 6,245.1 154,889,431 30,977,886 2,086,078,485 417,215,697 34,681 6,936 Diff % -1.4% 0.7% 34.6% 58.8% 24.1%

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Volume 23 Issue 6 10th February 2013

Most Active Sectors & Companies Description Sectors REAL ESTATE SECTOR FINANCIAL SERVICES SECTOR BANKS SECTOR INDUSTRIALS SECTOR OIL & GAS SECTOR Description Companies INVESTORS HOLDING GROUP CO.KSCC NATIONAL BANK OF KUWAIT GULF PETROLEUM INVESTMENT (S.A.K.C) ABYAAR REAL ESTATE DEVELOPMENT CO. KSCC ALSALAM GROUP HOLDING CO. K.S.C.C Total Value Traded KD 60,507,999 56,042,299 33,303,291 26,571,019 11,708,721 Value Traded KD 18,659,292 11,865,558 11,290,250 10,323,309 8,712,575 60,850,985 % of Total Market 29.0% 26.9% 16.0% 12.7% 5.6% % of Total Market 9.0% 5.7% 5.4% 5.0% 4.2% 29.2%

ALSHALL INDEX Increased Value (# of Companies) Decreased Value (# of Companies) Unchanged Value (# of Companies) Total Companies THU 07/02/13 425.4 291.3 500.2 367.1 312.6 499.1 444.2 1125.2 465.4 249.0 413.4 191.3 818.6 60.1 330.9 63.9 307.9 187.8 100.0 138.7 87.0 277.4 245.6 1372.9 47.0 216.7 187.2 49.9 648.2 81.9 463.6 97.1 266.2 THU 31/01/2013 425.4 287.8 521.9 354.9 328.3 493.1 468.4 1138.7 468.6 241.8 413.4 201.3 818.6 63.6 330.6 63.9 307.9 187.8 93.4 138.2 87.0 252.9 253.6 1413.2 41.5 214.4 192.3 50.8 663.3 79.3 511.6 106.6 279.2

Week 6 07/02/2013 11 19 11 41 DIFF % 0.0 1.2 (4.2) 3.4 (4.8) 1.2 (5.2) (1.2) (0.7) 3.0 0.0 (5.0) 0.0 (5.5) 0.1 0.0 0.0 0.0 7.1 0.4 0.0 9.7 (3.2) (2.9) 13.3 1.1 (2.7) (1.8) (2.3) 3.3 (9.4) (8.9) (4.7) CLOSE 2012 416.4 294.8 514.7 342.7 307.4 493.1 428.0 1098.1 456.6 249.0 352.6 166.1 788.3 52.6 314.6 59.5 296.5 210.3 90.1 139.2 80.4 244.7 249.6 1494.0 40.8 214.1 182.1 49.9 670.8 78.0 503.6 98.2 273.8

Week 5 31/01/2013 15 14 12 41 DIFF % 2.2 (1.2) (2.8) 7.1 1.7 1.2 3.8 2.5 1.9 0.0 17.2 15.2 3.8 14.3 5.2 7.4 3.8 (10.7) 11.0 (0.4) 8.2 13.4 (1.6) (8.1) 15.2 1.2 2.8 0.0 (3.4) 5.0 (7.9) (1.1) (2.8)

Company Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The National Bank Of Kuwait The Gulf Bank Commercial Bank Of Kuwait Al-Ahli Bank Of Kuwait Kuwait International Bank Bank Of Kuwait & The Middle East Burgan Bank Kuwait Finance House Banking Sector Commercial Facilities Co International Financial Advisors National Investments Kuwait Investment Projects Coast Investment & Development Investment Sector Kuwait Insurance Company Gulf Insurance Company Al-Ahleia Insurance Company Warba Insurance Company Insurance Sector Kuwait Real Estate Company United Realty Company National Real Estate Company Salhiah Real Estate Company Pearl Of Kuwait Real Estate Co Real Estate Sector The National Industries Kuwait Metal Pipe Industries Co Kuwait Cement Co Refrigeration Industries Co Gulf Cable & Electrical Industries Contracting & Marine Services Co Industrial Sector

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Volume 23 Issue 6 10th February 2013

29 30 31 32 33 34 35 36 37 38 39 40 41 Kuwait National Cinemas Kuwait Hotels Company The Public Warehousing Co Kuwait Commercial Markets Complex Mobile Telecommunications Co - ZAIN Kuwait Computer Co Services Sector Livestock Transport & Trading Co United Fisheries Of Kuwait Kuwait United Poultry Co Kuwait Food Co Food Sector Sharjah Cement Co Gulf Cement Co Umm Al-Qaiwain Cement Industries Non Kuwaiti Companies General Index 502.2 110.0 1877.4 117.8 1758.6 51.5 1396.4 140.0 70.6 43.3 1813.1 631.1 299.5 342.7 478.3 218.3 448.0 564.9 110.0 1910.9 119.3 1852.3 56.4 1462.2 140.0 73.6 40.0 1813.1 630.4 284.0 342.7 463.5 215.5 454.5 (11.1) 0.0 (1.8) (1.3) (5.1) (8.7) (4.5) 0.0 (4.1) 8.3 0.0 0.1 5.5 0.0 3.2 1.3 (1.4) 564.9 112.2 1709.7 128.6 1696.2 48.6 1338.5 135.0 70.6 40.0 1714.5 597.6 268.4 322.6 426.8 208.1 438.2 (11.1) (2.0) 9.8 (8.4) 3.7 6.0 4.3 3.7 0.0 8.3 5.8 5.6 11.6 6.2 12.1 4.9 2.2