Report sums up GCC economic scene in July |
Kuwait News Agency - 08 August, 2012
"The GCC economies continue to grow resiliently on the back of expansive fiscal policies, large-ticket infrastructure project execution, and increased Oil and gas exports at firm prices.
"The GCC economies have also been experiencing rapid increase in investments, both domestically by the private and public sectors, and internationally," said the specialized August report published Tuesday by Gulf Investment Corporation.
The report said GCC economic growth is also supported by both private and public sectors executing mega-projects in the vital sectors of industry, transportation, communications, power, and infrastructure and increased earnings from the tourism sector.
The corporation said GCC states had employed effective economic and monetary policies to counter regional and global economic shocks and this contributed to continued development and increase in economic growth figures.
One sign of this attitude is flexibility regarding the Euro Zone, whether at times of growth or recession. The lesson learnt, the report said, is to avoid over-spending at times of plenty and to channel resources into productive investment venues.
There is increasing momentum in steps to realize economic integration and federal union on all levels, including the level of monetary and banking policies.
GCC economic leadership, the report argued, realizes fully the important role of small to medium-size enterprises at times of plenty as well as times of challenge, as they constitute a source of income as well as job opportunities throughout the economic cycle, and thus the nations concerned are seen putting more care into this area.
The GCC countries also realize fully that the strength of the economic union stems from genuinely working on strengthening all parts, big and small alike, since what harms one stands to harm the others.
When it comes to economic market sectors, the report said a state of alert was stirred by Saudi Arabia's mortgage law, recently issued at a time when regional stock markets are still vulnerable to global flux, including tug and pull related to the slowdown of US economic growth, the European sovereign debt crisis, and a possible economic collapse in the Euro Zone.
Improvement in oil prices and forecasts of stronger profit figures for Q2 of 2012 was sufficient to check a downward direction. Oil Prices went up again in July after a sharp fall in previous months with Brent gaining 7.19 percent and Texas crude gaining 3.15 percent.
The Standard and Poor's Index for Gulf stock gained 1.65 percent in July, compared to a drop of 4 percent the month before. Positive performance of the Saudi, Qatari, and Emirati markets contributed to this increase, the report said.
Dubai saw the best monetary market performance while Oman's was the worst for the same month.
As for the Kuwaiti market, the report indicated that despite presence of some encouraging factors, political unease doubled investors' woes. This was compounded by disappointing results announced by National Bank of Kuwait (NBK) and a request by National Industries Group for an extension of four more years for its sukuk maturity.
The report also recalled that the Kuwait Stock Exchange weighted and price indices lost 1.71 and 1.19 percent, respectively. The drop was seen in leading market sectors; communications lost 4.89 percent on the heels of negative performance of Zain, and the banking sector also slipped 1.76 percent.
Faltering growth has forced central banks around the world to respond, and July was a month of monetary easing. It started with the US Fed extending its "Operation Twist", followed by a rate cut by the European Central Bank (ECB) to all time low of 0.75 bps, while Bank of England extended its asset buying programme by GBP 50 bn.
Globally, the report added, the scene was no different as China's central bank
unexpectedly cut interest rates for the second time within a month in a bid to bolster growth, followed by Brazil and South Korea.
The US reported a Q2 GDP growth rate of 1.5 percent, signaling continued slowdown. However, the biggest worry at this point of time remains the unsustainable yield on Spanish and Italian bonds, and all eyes will be set on the 2 August meeting of ECB, where some kind of policy initiative is expected.
On regional level, the report said the month was good "with all the major regional indices ending at all-time highs. The HSBC Nasdaq-Dubai GCC USD Sukuk/Bond TR Index (GCCB) rose m-o-m, to close at 150.89 from 148.33 and spreads tightened by 7bps, yielding 3.82 percent.
"The HSBC Nasdaq-Dubai USD Sukuk TR Index (SKBI) increased m-o-m from 140.
40 to 141.71, while the HSBC Nasdaq-Dubai GCC Conventional USD Bond TR Index (GCBI) traded in a range of 150-154.
In terms of credit rating, the report noted that Fitch had affirmed Waha Aerospace at "AA' with a "stable" outlook and Kuwait's IDR at "AA" with "Stable" outlook.