Beirut SE (1 year)
Current Year High: 1,200.49 Current Year Low: 705.56
All things considered, the Beirut Stock Exchange outperformed its regional peers in 2009, when measured at the beginning of the year-end holiday season, which includes the Hajj pilgrimage, Christmas, and New Year.
The BSE index gained over 41% by its 2009 Independence Day weekend (November 20), a performance achieved otherwise only by the Tunindex of the Tunisian bourse.
But before speculating that their shared heritage from ancient Carthage and Berytus is an omen for the next conquest of global stock markets to be achieved by good Phoenician fortune, it is worth reviewing the BSE’s drivers of growth and assessing the Lebanese market’s necessary quests for the gains of 2009 to be meaningful for the real economy.
The best performer in Lebanon in 2009 was the real estate firm Solidere, with gains above 55% in both share classes.
Audi and BLOM, the two leading banks whose common shares together represent over 37% in market capitalization traded on the BSE, recorded common share price gains of 44.3% and 10.4% respectively.
Hence, banking and real estate remained the two legs of Lebanese equity trading. Common stock and share variations representing the two sectors comprise BSE market capitalization of about $12 billion at a ratio of about two-to-one.
Stocks from other sectors — only industrial and trading are categories found in BSE bulletins — account for not even 1% of market capitalization. For far too many years there has been no new blood from other sectors added to the exchange via initial public offerings.
On the other hand, in November 2009, the BSE had to delist one industrial stock, of ceramics tile maker Uniceramic, following the company’s declaration of bankruptcy in September 2009. It was the second manufacturer with a rich history in the industrial sector to forcibly exit from the Lebanese bourse since the BSE reopened in 1996, after pipe maker Eternit went defunct almost a decade earlier.
But when new listings should have emerged and initial public offerings were accumulating on other equity markets in the region, the BSE moved from one pained politically induced slumber to the next.
In all of 2007 and until May 2008, political paralysis stunted the prospects of new listings on the exchange. From mid-2008 through 2009, it was the global financial crisis that threw a spanner into the works.
With 2010 on the doorsteps investors in the Middle East have been preparing for a new rise in IPO activity, and companies in the Gulf Cooperation Council are getting their due diligence done and readying prospectuses. In Damascus, the new Syrian bourse is anticipating a small but steady stream of stock market entrants. What will happen in Beirut?
The 2009 performance of the BSE was a testimony to great expectations from the business of politics. From May 1 until July 1, when the preparations for parliamentary elections and their successful execution cheered the moods, shares of Solidere rose 65%. Fadi Khalaf, secretary general of the Union of Arab Stock Exchanges and chairman of the BSE until August 31 2009, would not give any numerical predictions but reckoned that the stock undervalued at around $25 in both classes.
“Just look at the number of square meters owned by Solidere, the prices per square meter in the region and apply that to the Beirut Central District (BCD),” he says. “The price of the stock still has to catch up with the prices of real estate in the BCD.”
The two-month period from September 10 to November 10 saw stocks fluctuate lower on days with news of political problems, but the BSE added over 17% in a positive climate of strong banking performance, record tourism growth, confirmation of good remittances, and generally hopeful politics.
“Investors on the BSE have experienced many political and military issues in Lebanon. At a certain time they started separating the political issues from the financial issues,” says Khalaf, although he concedes that this is not “100%” applicable.
The formation of a new Lebanese Cabinet after 19 weeks gestation brought on a withdrawal from the BSE’s year high reached on November 9. Since then, pundits have highlighted matters such as if the new Cabinet will have the required potency for reshaping economic policies.
Much now will depend on real, reliable steps in floating state-affiliated companies on the BSE, as well as on the infusion of new private sector companies with a measure of sector diversity. The Lebanese economy has been given a positive assessment and outlook for the near term, as far as that can be done.
However, for this to be amplified in the stock market, the BSE’s stock diversity and liquidity must increase. That may now be in the cards, with Lebanon’s central bank governor stating that the national carrier, Middle East Airlines, of which the Central Bank of Lebanon owns a 99.23% share, is planning to list on the BSE. The Lebanese chocolates manufacturer and retailer Patchi, as well as Naas Water have also expressed interest in listing on the exchange. “Listing on BSE is affected by the family companies and the absence of privatization and by prices of stock performance,” says Khalaf. “Every time we have good performance and a run in prices we are contacted by some companies to list.”
The other big issue for 2010 and 2011 would be a change in alignment. While they all had an impact, oil prices, regional economics, or developed market share price trends were not consistent forces of primary influence on the BSE index movement over the past 13 years.
The question for the BSE is, will the bourse be able to decouple itself from its historic drivers — from its sluggish past, from fear of politics, from itself?
“With the turmoil we had, prices on the BSE consolidated even though they were not yet overpriced,” says Khalaf. “Consolidating at underpriced levels gives the markets steam and momentum. Thus the market is now more ready to see new moves and this is why, with stability and enough consolidation at attractive prices, it is a good time to go forward.”
Amman SE (1 year)
Current Year High: 2,968.77 Current Year Low: 2,454.48
Ten weeks of selling pressure in the summer of 2009 tarnished the otherwise bright market trend on the Amman Stock Exchange (ASE) to a darker color. As the ASE general index nosedived from its year-high 2968.77 points on June 2 to its low of 2,454.48 points on August 19, the momentum of Jordanian stocks thereafter did not return to the positive. When compared with the start of 2009, the ASE index close of 2,573.37 points in the Nov 19 session represented a disappointing 6.71% drop.
Jordan’s banking sector continuously underperformed the market in the first 11 months of 2009 and was the biggest loser on the bourse by Nov 19, with a drop of 15% from the year’s first trading session. The sub-index for industrial stocks showed the widest swings, but in the end its 8.3% drop for the period was almost as close to the general index’s performance as that of the services index (-6.8%), which had shadowed the general index for much of the year. Insurance turned out to be a surprise upside wild card, closing the period 4.3% up, but has to be noted for its small share in ASE cumulative market cap. Arab Bank, the country’s strongest financial firm, saw a loss of 16.6% of its share price between the start of 2009 and Nov 19. Arab Potash, the heavyweight industrial mining scrip, dropped 4.6%, while Jordan Phosphate Mines and The Housing Bank for Trade and Finance also experienced double-digit price drops. Jordan Telecom Group was a large firm to show an uptrend in the review period, with a 7.7% gain. Jordan Emirates Insurance Company, a firm that was entirely restructured and recapitalized in 2009, somewhat theoretically came out as the best gainer, with a massive 585% share price increase.
Abu Dhabi SE (1 year)
Current Year High: 3,239.74 Current Year Low: 2,136.64
For much of 2009, the Abu Dhabi Securities Exchange (ADX) appeared to roar handsomely, as its sibling in Dubai rocked. With a close at 2,924.26 points on Nov 19, the ADX general index gained 22.4% from the start of 2009, a solid third place in the Gulf Cooperation Council after the Saudi Stock Exchange and the Dubai Financial Market (DFM) and indefinitely better than the ADX slide of over 48% in the previous year. But Nov 2009 was not a strong month for the United Arab Emirates’ exchanges; index levels for ADX and DFM dropped over 3% between the start of the month and Nov 19. After the Nov 25 announcement of Dubai World’s debt dilemma, however, the ADX was infected in what looked like an H1N1 attack — a virus with minimal impact in big, distant places but rapidly spreading among relatives with exaggerated fears. The ADX index closed at 2,668.23 on Nov 30, suffering a one-day fall of 8.3%, even greater than that of the DFM. The 2009 bottom on the ADX was recorded back on January 22, at 2,136.64 points. The year high of 3,239.74 was set on October 15. Large caps that were affected heavily by selling pressure at the end of the review period included real estate stocks Aldar and Sorouh, as well as ADX market cap leader Etisalat as well as the National Bank of Abu Dhabi and First Gulf Bank. For the first 11 months in 2009 First Gulf was the top gainer on the ADX with a share price improvement of 85%. NBAD gained 50.2%; Aldar Properties (+24.9%) and Etisalat (+2.7%) were also on the positive side by the Nov 30 close, albeit in a far more negative environment than in earlier months.
Dubai FM (1 year)
Current Year High: 2,373.37 Current Year Low: 1,433.14
A hub of global attention in these challenging times for super-ambitious and somewhat burnt investment locales, the Dubai emirate of wonders tried something new at the end of Nov 2009 — how it is to run after taking the belt out of your pants and with your shoes tied together. The experiment of shocking investors by exhibiting the Dubai World debt dilemma in a most embarrassing manner (mostly due to the announcement’s timing) drove the Dubai World shares on Nasdaq Dubai down 15% in a single session and had a short-term erosion effect of around 10.1 billion Dirhams ($2.75 billion) on the market cap of the Dubai Financial Market, resulting in a DFM market cap readout of $41 billion on Nov 30. The market close at 1,940.36 points on Nov 30 was a 6.6% drop on the month and reduced the year-to-date increase to 18.45% for 2009. Less than two weeks earlier, the year-to-date increase had stood at over 30%. Of more serious concern, Dubai gambled away the trust of its participants and stakeholders, which until Nov 24, had been on a good track, thanks to the Gulf Cooperation Council’s most pronounced turnaround in stock fortunes when comparing 2009 with 2008. The DFM year low was an index reading of 1,433.14 points on February 5. The 2009 year high of 2,373.37 was reached on October 14. Gulfa Mineral Water, a firm with a $38 million market cap, was an upside outlier in share price developments with a 153% gain. Although hit hard with limit-down drops at the end of Nov, Emaar Properties gained 61% between the start of the year and Nov 30. The Emirates’ largest bank, NBD, climbed 65.2%.
Kuwait SE (1 year)
Current Year High: 8,966.00 Current Year Low: 6,391.50
Investors were sure to be worried at the Kuwait Stock Exchange’s (KSE) performance in the fourth quarter’s first half. The sharp slide of the index between October 7 and Nov 17 wiped out gains achieved in spring and took the KSE index back into negative territory, closing 13.2% lower at 6754.30 points onNov 19 when compared with the start of 2009. The year had started badly enough, with a 29% nosedive from the 12 month high at 8,966 on December 15, 2008, to the current 12 month low of 6491.50 on March 1, 2009.
Recovery seemed apparent in the following three months with a 31% index climb to early June, but the 8,000 points level was quickly lost again and the scales shifted increasingly to downside melancholy as time went by. Food was the most solid sector in the KSE annals this year, but could not sustain its intermediate gains of up to 50% and ended the review period only 16% higher. The industrial sector also had a positive close, up 6% year-to-date on Nov 19. Investments, real estate, insurance and banking all underperformed the general index by between 14% for investments and 2% for banking. More than 40 stocks showed double-digit share price increases during the review period, but the losers were greater in number. Real estate group Safat Global Holding fared the worst, suffering a 74% price weakening. The multi-line conglomerate Al Abraj Holding lost 72.5% and communications player Hits Telecom gave up 69%. Market cap leader Zain ended the review period with a 14.3% improved share price and top bank NBK ended 1.2% lower.
Saudi Arabia SE (1 year)
Current Year High: 6,568.47 Current Year Low: 4,130.01
The Saudi Stock Exchange (SSE) consolidated its regional importance through a leading positive performance between January 2009 and the religious high season of the Hajj pilgrimage. By the Nov 18 close, the TASI general index was up 31.6% for the year-to-date. The TASI’s year low was marked on March 9 with 4,130.01 points and the peak was reached on October 24 at 6,588.47. The main rally in 2009 lasted from March 10 until late May and took the index 47.2% higher to 6,100.85 points on May 23. At total turnover of $319 billion, or $1.4 billion a day, and a market cap of $328.5 billion at the close of Nov 18, the SSE was approaching the end of 2009 still quite far behind top performance years such as 2007, when it had ended with daily
average trade volume exceeding $2.6 billion and a year-end market cap of $515 billion. However, the broadly positive performance of 2009 entailed all sectors, except for a
5% drop in the building and construction sub-index. The real estate sector managed a 5% gain; the banking sector advanced 19% and the important petrochemicals sub-index rose 55.4% — making it the second best performer after the maverick insurance
sector, where the speculative attractions of the many newly listed insurers lured investors into a buying mood, pushing the insurance sub-index up 86% by the Nov 18 close. Seven insurance firms topped the price performance charts with gains above 200%. More weightily, market cap leader SABIC gained 58%.
Muscat SM (1 year)
Current Year High: 6,762.94 Current Year Low: 4,223.63
Performance of Gulf Cooperation Council stock exchanges in the penultimate month of 2009 was at best subdued; the Muscat Securities Market (MSM) closed the Nov 19 session at 6385.23 points, a measly 0.5% up on the month. Its 17.4% year-to-date gain, however, put the MSM into a solid middle position in annual performance among its neighbors. Throughout 2008, the MSM lost nearly 41% of its value under the impact of the global recession. The 2009 year low of 4223.63 points on January 21 and the year high of 6762.94 points on October 11 were 181 trading days apart. The MSM general index gained 60% during that period, which entailed only short periods of intermittent index drops. Looking at sector performances in 2009, the services and insurance index ended the review period 4.9% higher, but was a clear underperformer when compared with the MSM sub-indices for banking and industrial stocks. The banking index gained 42.3% and the industrial index recorded even a 67.8% increase. The spread between losing and winning stocks in 2009 was quite substantial but gainers outnumbered losers. After downward pressure in 2008 had pushed several large companies significantly lower, in 2009 National Bank of Oman (down 10.7%) and Omantel (down 16.5%) were still beset with negative price performance among the five largest companies by market cap. By contrast, shares of Bank Muscat gained 8.9% between the year’s first close and Nov 19. Oman’s major initial public offering in 2007, Galfar Engineering, gained 29%, closing on Nov 19 within 0.5% of its issue price.
Bahrain SE (1 year)
Current Year High: 1,954.75 Current Year Low: 1,438.32
There was no magic in being small for the Bahrain Stock Exchange (BSE) in 2009. The negative sentiment that had driven the BSE general index 34% lower in 2008 carried on unabated until mid March of 2009. The drop in early 2009 amounted to 12%. After a short bout of springtime awakening, the overriding trend returned to unfavorable and the BSE close at 1443.35 points translated into a 20% loss for the year-to-date. The less than pretty performance picture is reinforced by the fact that the BSE’s 12-month high was in Nov of 2008, while the low for the year-to-date was recorded on Nov 18, 2009. After a shy rise in September, the index dropped 9.77% in the period from October 7 to Nov 19. The sector indices on the BSE revealed the worst performer to be the investments sector. It closed 31% lower on Nov 19 when compared with the start of the year. The other financial values, insurance and banking, also were deep in the doldrums with share price index losses of 18% and 15%, respectively. Industry was the brightest sector with a gain of 20%, followed by hotels and tourism, up 11%. Less than 10 companies achieved year-to-date share price gains, led by Bahrain Flour Mills with a 45% rise. Gulf Hotels Group, Al Salam Bank Bahrain, and contracting group Nass Corporation showed gains of near 20% each. The stocks of Global Investment House (GIH), Gulf Finance House (GFH) and Al Baraka Banking Group were the basement performers of the first 47 weeks in 2009. GIH lost 76.7%, followed by GFH at 53.7% and Al Baraka at 53.5%, noting that the latter recorded a 10% day-on-day rise at the very end of the period.
Doha SM (1 year)
Current Year High: 7,624.45 Current Year Low: 4,230.19
The Doha Securities Market (DSM) accomplished an overall modestly positive performance in the period from January 2009 to Nov 19, closing at 7183.76 points with a year-to-date gain of 4.3%. Even as the DSM index experienced an early 2009 aftershock to the landslide of share prices that overwhelmed the market between June and Nov of 2008, the upward arrows proved themselves between March and October 2009. From the year low of 4,230.19 on March 4 to the year high of 7,624.45 points on October 6, the DSM benchmark index rose by just over 80%. Real estate and banking stocks contributed greatly to the increase in that period. The down and up of DSM sub-indices during the first 11 months of 2009 did not show great differences in direction of sectors, but the services and industrial indices were consistently outperforming the general index just as banking and insurance underperformed. By Nov 19, the upside margin versus the general index amounted to 6% for services and 7% for indices; juxtaposed by downside margins of 4% for banking and 12% for insurance. In a broadly balanced split between losing and gaining companies, the best performer in 2009 was Ezdan Real Estate with a 139% gain. The stock, the DSM’s number three by market cap at the end of the review period, had skyrocketed in
August and the first half of September. The other big names at the top of the market cap ranking (Industries Qatar, Qatar National Bank, and Qatar Telecom) all closed in positive territory on Nov 19 for the year to date, respectively up 14%, 19%, and 37%. Down 39%, Qatar General Insurance and Reinsurance was top loser.
Tunis SE (1 year)
Current Year High: 4,194.27 Current Year Low: 2,836.64
No Middle Eastern bourse could keep up with the index gains of the best-performing emerging markets in 2009, but the ones that did improve more than their regional peers were two MENA dwarves — Tunisia and Lebanon. Each positioned in the shallowest part of the market cap pool, the Tunisian Stock Exchange (TSE) and the Beirut Stock Exchange accomplished index gains exceeding 40% year-to-date by Nov 20. The Tunindex closed at 4099.63 points, up 41.7% on the year. The bourse’s 12-month low was seen back in
December 2008 and the first trading session close of 2009 at 2,889.97, was the market’s year-to-date bottom. The peak came on October 21, at 4194.27 points. This was also a historic high, in light of the fact that the Tunindex had been rising not only in 2009 but also in 2008. The TSE was internationally noted for standing higher one year after the historic Lehman Brothers collapse than it did on the day of the crash. All sectors on the Tunisian bourse gained in 2009. Retail and consumer services came out on top, up by 70.1% and 56.9%, whereas consumer goods manufacturers and building and construction materials were the laggards, with gains merely in the 20% range. In line with the smooth uptrend of Tunisian equities, winners outnumbered losers in the 2009 review period by four-to-one. The only large scrip to move lower was Tunisair, dropping 9.8%. The size leaders on the TSE, the Poulina Group Holding industrial and trade conglomerate and the Banque de Tunisie advanced by 13.4% and 28.3%, respectively. Poulina, which had debuted on the exchange in an, in hindsight, unenviable moment in 2008, rebounded in spring 2009 and by Nov 20, recorded a 15% gain since its initial public offering.
Casablanca SE (1 year)
Current Year High: 11,729.86 Current Year Low: 9,405.86
The Casablanca Stock Exchange (CSE) in 2009 was mellow in the sense of soft performance numbers. When compared with the first trading close back in January, the general index of the CSE ended the Nov 19 session 2.3% down, at 10,338.46 points. The index, which bottomed this year at 9,405.86 on January 8, passed its high for 2009 at 11,729.86 points on June 17. Whereas the previous year had seen the Moroccan securities market take a small beating (by regional comparison), the index lost 24% between mid April and year-end 2008. Both optimism and volatility were noticeable in 2009 but concentrated in the early months of the year. In the second half of the review period, sideways and gradual downward movement were the main index directions. The total market cap on Nov 19, according to Zawya, was equal to $65.5 billion and could not measure up to the Egyptian Exchange (EGX) market cap of over $88 billion. This demonstrated the divergent market trends on Atlas and Nile, as the Moroccan bourse had in spring temporarily outshone the EGX as the second largest MENA bourse after Saudi Arabia. Believers in the growth potential of the CSE forecast a surge of listings, market activity and index values in coming years. Stock performance of the largest listed Moroccan companies in 2009 was in the lower half of market records when comparing their Nov 19 closing prices to those at the start if the year. The five largest companies by market cap all had share price losses, which ranged from 1.75% at Attijariwafa Bank to 10.4% at Maroc Telecom and 23.3% at real estate firm Compagnie Generale Immobiliere. The best upward movers were found in metal and manufacturing stocks.
Egypt CASE (1 year)
Current Year High: 7,249.55 Current Year Low: 3,389.31
With 47 performance weeks of 2009 in the bag, the more fortunate ones among Egyptian equity players should have felt much happier — or at least about 20 times more financially satisfied — than they had been around the same time in 2008. Where the Egyptian Stock Exchange’s (EGX) benchmark index had been down by two thirds in Nov 2008 and full-year 2008 had spelt disaster with a 57% negative price return since the start of the year, the 6,195 points close of the EGX 30 on Nov 19, 2009, represented a year-to-date gain of 34.8%. The market experienced its year low at 3389.31 points on February 5 and scaled its high for the past 11 months on October 26, at 7,249.55 points. However, with the end-of-Nov Dubai debacle of dumb communication and debt rescheduling, the EGX was the first MENA victim outside of the UAE, sliding 8% on Nov 30, on account of nervous contagion. Whereas tremors were hardly visible on the Tunisian and Moroccan bourses, the Dubai pull-down demonstrated that Egypt is a vulnerable market. The one-day Nov 30 anomaly sealed a month of Egyptian stock weakening, as the EGX 30 shed 19% between Oct 26 and Nov 30. Of the largest stocks in various sectors, overall market cap leader Orascom Construction Holding closed 62.6% up; Commercial International Bank climbed 36.5% and Talaat Moustafa Group achieved a gain of 97.3% (all by their Nov 30 close versus the start of 2009). Telecom Egypt saw a marginal drop of 0.3% and El Ezz Aldekhela Steel gave up 7.5%. Pronounced drops in late Nov contributed to make Orascom Telecommunications and El Sewedy
Cables end the first 11 months in 2009 down by 14% and 20%, respectively.
