The Beirut Stock Exchange entered 2006 with its most auspicious start since reopening a decade ago. Trading volumes soared to new heights and the Blom Index rallied by about 50% in January. Backed by regional investor appreciation, shares of the big banks and of Solidere reached valuations that had been fanciful theories in earlier years. Banks Audi and BLOM used the felicitous time for capital increases, issuing new shares and GDRs; other companies enthused about IPO opportunities. The Beirut market lost some of its verve in the spring time crash season of regional bourses, but suffered less than its peers in the GCC. It took a war between Israel and Hizbullah to create a trough in July and August, and further hideous political assaults by forces unknown and known to drive the index in November 2006 below year-end 2005 levels.
Beirut SE: Blom (1 year)
Current Year High: 1,934.21 Current Year Low: 1,013.97
On the Amman Stock Exchange, the 2006 trading story mirrored the goings-on of Gulf stock markets, even as the Hashemite Kingdom’s economy experienced the high flying world oil prices, inversely to the GCC countries, as the year’s biggest financial burden. In late November, the ASE Index shrank to its lowest level of the year, some 3,400 points below the market’s 2006 peak on January 8 and 31% down from the start of the year. Investor confidence throughout 2006 didn’t spark sufficiently to re-ignite the fire that had driven the ASE upwards during all of 2005. This notwithstanding, investments by highly liquid Gulf companies, creation of new financial and real estate ventures, and a lively period of company formations in the Jordanian economy set positive accents in a challenging year. Besides the market-ruling Arab Bank, Jordan Telecom (where France Telecom at long last acquired a controlling stake) supplied talking points in 2006.
The Abu Dhabi Securities Market lost almost 42% between the beginning of January and the last November weekend, but still fared better than its sister exchange in Dubai where the DFM Index dwindled by 65% over the same period. But different to the DFM with its flotation move, ADSM management in the last quarter of 2006 busily denied rumors that a partial privatization and flotation of the state-owned bourse were on the books. Where ADSM and DFM managements appeared to agree was in stating that a merger of the two exchanges was not a near-term option, even as numerous voices in and around the UAE have been in consensus that consolidation into a broader and stronger unified bourse would be a good thing and eventually inevitable if the Emirati exchanges want to remain attractive in the longer term.
The high point of the year for the Dubai Financial Market came in the middle of November when institutional and individual investors queued up to buy the 680 million shares that the DFM made available in its own initial public offering. At par value of 1 Dirham per share, the region’s first IPO of a stock exchange operator attracted subscriptions worth AED 190 billion for general subscription, which represented almost 43% of the AED 1.6 billion IPO. Analysts attributed the intense investor interest in the DFM IPO to the attractiveness of primary markets but did not suggest that overall trading activity on the Dubai exchange was prone to strengthen in the near term. The past 12 months to late November 2006 saw the DFM lose over 900 points from peaks it had reached almost exactly a year earlier.
The Kuwait Stock Exchange braced the storms of 2006 with somewhat less violent appearing Index movements than the UAE and Saudi bourses. It also testified to its reputation as one of the region’s more mature exchanges by achieving a 12% increase in traded companies in 2006. Nonetheless, the KSE’s rapid slide from its year-high of 12,054 points on February 4 to less than 10,000 points on March 14 gave many individual market participants the shakes and brought about several demonstrations in which Kuwaiti retail investors demanded government intervention to prop up the exchange. After achieving gains between end of July and late October, the KSE disappointed somewhat in November by moving into a downward period for the fourth time in 2006 and once again dipping below the 10,000 points line, but its year-to-date contraction of around 15% at end November was quite presentable relative to its main competitors in the GCC.
The Saudi Stock Exchange is the trendsetter for Gulf markets by the power of its underlying economy, its trade volumes and its market capitalization. When the Tadawul Index was still on the rise early in 2006 to its peak of 20,655 points on February 15, it was moving contrary to the correction mode that already ruled in neighboring markets. But just as analysts warned of the abnormally high price to earnings ratios of Saudi stocks in late February, the SSE got caught on a 60% slide between March and November. Volatility dominated and market interventions by big players proved futile, illustrating instead the market’s transparency problems and its immaturity. Noteworthy measures by the authorities included admission of resident foreigners and an SSE-wide stock split in March and April, and licensing of new brokerages throughout 2006.
Not the main stage of Gulf stock developments, the Muscat Securities Market in 2006 stayed its course in the bandwidth of 4,700 to 5,800 points where it already had been trading in during the second half of 2005. The spring time meltdown of GCC bourses affected the Omani bourse but the correction was less pronounced than elsewhere, and from mid August until the end of October, the MSM was moving up nicely, climbing more than 1,000 points. While local traders say the Omani market has a lot of potential and is not governed by rumors and similar volatility drivers, the sultanate still many have fewer companies that will attract international and regional attention than other GCC markets. Nonetheless, by the last weekend of November, the MSM was the Gulf’s solitary bourse reporting an index gain—nearly 12%—from the start of the year.
Muscat SM (1 year)
Current Year High: 5,799.77 Current Year Low: 4,657.16
The Bahrain Stock Exchange started 2006 with a meteoric rise of more than 9% to its year-high of 2347 points at the beginning of February, only to take a hard fall directly afterwards that brought its index down 13% within less than two months. Another volatile period followed from April through mid August, after which the BSE however regained a relatively solid posture that positioned it by end October in positive territory compared with the start of the year. In November, the market again fell in step with the downward trend of the region’s other bourses, reporting in 2% lower year-to-date on the last weekend of the month. In a noteworthy change of its capital markets operating framework, Bahrain from September 2006 implemented a new law that established the Central Bank of Bahrain as single regulator for the kingdom’s financial services industry.
Qatar’s capital markets showed only short periods of gains in 2006 mixed into a persistent southward trend that pushed the Doha Securities Market Index 44% lower over the course of 11 months. The DSM, which had peaked already in September 2005, reached its highest point of the past 12 months in December of last year and, similar to the DFM, ended November 2006 on levels we had last witnessed two years earlier, in November 2004. The structure of the DSM’s portfolio of listed companies is still in need of development and analysts saw indications that the market will remain range bound for a while. However, from the third quarter of 2006 onward, licensing of finance firms and banks at the new Qatar Financial Center made significant progress and the creation of this parallel financial services center is expected to contribute to the listing of new companies on the DSM.
Petite but très chic: the Tunisian bourse is North Africa’s smallest, but like its Moroccan counterpart, it advanced steadily throughout the year and could report a 44% index gain between January 1 and November 27. The Tunindex reached 2,326.80 points and the TSE achieved a market capitalization of $4.274 billion. This is little over half of the market cap of the Beirut Stock Exchange, the region’s second-smallest, and equals just about one and a quarter percent of the Saudi Stock Market’s market capitalization. Another area where the TSE appears somewhat diminutive, is the creation of news, at least as far as news that make it to the region’s English-oriented markets.
The Casablanca Stock Exchange dropped by some 1,850 points or more than 20% between May 8 and June 14 of this year, but in the larger picture of its development over the past 11 months, this was a mere breather in a bull run that drove the index up by 65% between the start of the year and the last November weekend when the CSE crossed the 9,000 points line and rode to a new high for the year—a feat irrespective of the question if those round numbers, often cited as “psychological barriers,” have any real significance in the region’s fast-paced markets. Traditionally driven by banking and finance stocks, the CSE saw lively trading action this year with one highlight being the telecom sector and new IPOs that widened the bourse’s scope. At the end of November, construction supplies firm Fenié Brossette and industrial equipment trader Société de Réalisations Mécaniques embarked on the CSE’s two latest IPOs.
With Egypt’s economic strengthening throughout the reform-minded past two years, the Cairo and Alexandria Exchanges benefited from privatization action and diverse investor interest that pushed the Hermes Index up by well over 6% at the last November weekend when compared with the end of 2005. CASE was by and large buoyant in the second half of 2006, after essentially sliding in the first half and reaching a year low of just under 42,000 points in late June. The Hermes’s rise from this level to above 59,000 points at the end of November marked one of the region’s most impressive second-half performances and when viewed over the past two years, the index was over 250 higher. Telecommunications and banking stocks were among the bourse’s attention grabbers in 2006 and the market expects further impulses from privatization and IPO activities.
