HIGHLIGHTS

The fallout of the novel coronavirus pandemic is now

sweeping the globe; putting a dramatic end to the

longest running bull market in US history and pushing

central banks around the world to cut rates to zero and

embark on massive monetary easing programs.

US Indices tumbled into bear market with the S&P 500

and DJIA losing 34% and 37% within a month between

20 February and 23 March, and volatility returning to its

peak level of 2008. The S&P and the Dow are now 20%

and 23% down for the first quarter.

The MSCI AC World Index declined by 13.7% and the

MSCI EM Index by 15.6% bringing their losses for the

first quarter to 21.7% and 24% respectively.

The oil markets experienced a double shock with the

output cut deal falling apart and demand experiencing

significant destruction as economies around the world

came to a sudden stop with the enforcement of

lockdowns. Brent crude is down 66.5% since the

beginning of the year.

MENA markets experienced the heaviest losses since

the financial crisis. The S&P GCC Composite declined

by 17.7% in March compounding its quarterly losses to

25%. Markets in the UAE were the most affected with

Dubai and Abu Dhabi down 31.6% and 23.8%

respectively.

GLOBAL EQUITIES

The month of March saw global markets go into panic

mode over the covid-19 pandemic that’s sweeping the

planet. With the epicenter of the pandemic now

moving to the United States while Europe is still at the

height of the crisis, it seems that the world still needs

significantly more time to curb the spread.

Chart 1: MSCI ACWI, S&P 500 & Dow Jones

Source: Bloomberg (figures rebased)

The pandemic brought the longest running bull market

in the history of the United States to a dramatic end in

March. Major indices tumbled into bear territory with

the S&P 500 index and the Dow Industrial Average

(DJIA) declining by 34% and 37% from their peak on

February 20 to their trough on March 23. Volatility

spiked as the CBOE Volatility Index (VIX) surpassed the

85.5 mark, a level last seen during the financial crisis in

2008. For the month, the S&P 500 and the DJIA

registered declines of 12.5% and 13.7%, while declining

20.0% and 23.2% respectively for the first quarter. The

Nasdaq Composite held better than the broad market,

declining 10.1% for the month and 14.2% for the

quarter. Treasury yields, on the other hand, continued

to sink to all-time lows, especially on the short end. The

2-year yield closed the month at 0.23% down from

0.86% at the end of February, while the 10-year closed

at 0.62% down from 1.13% over the same period.

Markets around the world recorded double digit

losses, while central banks and governments

scrambled to enact measures that would provide

support for their economies amid fears of a deep global

recession. The MSCI AC World Index declined by 13.7%

in March bringing its quarterly losses to 21.7%, while

the MSCI EAFE saw declines of 13.8% for the month

and 23.4% for the first quarter. The Federal Reserve

slashed its federal funds rate by 50bps to a range of

1.0-1.25% then by a full percentage point to a range

0.0-0.25% in two emergency meetings on March 3 and

March 15. It also announced a massive easing program

which includes an unlimited asset purchase program, a

lending program for businesses, and for the first time,

a program to buy corporate bonds. On top of this, the

US government is finalizing an economic stimulus

package that would be the largest in US history. A $2

trillion bill that will provide the economy with a

massive amount of loans, tax breaks, and direct

payments to large and small corporates and

individuals.

Chart 2: European and UK Equities

Source: Bloomberg (figures rebased)

In terms of economic activity, the numbers that were

published for March would carry little meaning in

terms of reflecting the actual state of the economy due

to their lagging nature. Of the numbers announced so

far and that would give a glimpse of how the lockdowns

are affecting the US economy is the initial jobless

claims for the week ending March 20. It shot up to 3.28

million from a previous reading of 282,000, then

recorded 6.65 million for the week ending March 27.

March Nonfarm payrolls, which represent new jobs

created by the US economy, plummeted to a negative

701,000, while the unemployment rate ticked higher to

4.4% from 3.5%.

The picture wasn’t any better in Europe where Italy,

Spain, France, and Germany were at the center of the

global coronavirus pandemic. Travel bans across the

globe including that to the US from Europe in addition

to the underwhelming policy response from the

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Dow Jones

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Stoxx Europe 600 DAX Index CAC Index FTSE 100

European Central Bank pushed European markets

further into negative territory during the month. The

Stoxx Europe 600 fell by 14.8% to end the first quarter

down 23.0%. The German DAX and French CAC 40

dropped by 16.4% and 17.2% to record declines of

25.0% and 26.5% respectively for the first quarter.

Prior to the pandemic-induced market rout, the

European economy was growing modestly. GDP

estimate for the fourth quarter was revised up to 1.0%

year-on-year compared to 0.9% for Q3 and 1.2% for the

two previous quarters. All Economic indicators are,

however expected to increasingly show significant

declines. The Markit Manufacturing PMI declined to

44.8 in March compared to 49.2 a month earlier, but

this level is still far from reflecting the full effect of the

current crisis. The market is generally expecting much

worst statistics to come out in the coming few weeks.

The same applies to the UK were the FTSE 100 plunged

by 13.8% during March recording a quarterly decline of

24.8% for the quarter.

In Emerging markets, the slump was generally more

severe, especially outside Asia. The MSCI EM Index

declined by 15.6% during the month and 23.9% for the

first quarter, whereas the MSCI Asia ex-Japan declined

by 12.2% in March and 18.6% for the quarter. The

hardest hit during the month were Brazil’s Ibovespa

Index with a decline of 29.9% followed by India’s Nifty

50 which lost 23.3%. Elsewhere, Turkey’s Borsa

Istanbul 100 was down 15.4% and Russia was 9.9% in

the red, whereas Mexico and Taiwan were down 16.4%

and 14.0% respectively.

REGIONAL EQUITIES

In the GCC, equity markets sustained the heaviest

losses in more than a decade during the month

squeezed between the global fallout of the coronavirus

pandemic and an unprecedented drop in oil prices.

The collapse of the production cut agreement of OPEC

members and Russia, collectively known as OPEC+,

sent oil prices into free fall as oil producers scrambled

to increase production to preserve market share. This

is estimated to add 4 mb/d of oil to the available supply

amid declining demand. The collapse of oil prices was

further compounded by concerns of significant

declines for oil demand resulting from a sudden and

severe decline in transportation activities as countries

moved into lockdowns and air travel practically coming

to a halt as world government try to stem the spread

of the pandemic. WTI closed the month of March at

$20.48/bbl down 54.2% while Brent was down 55%

ending the month at $22.7/bbl. Brent and WTI are now

down 66.5% and 65.6% respectively since the

beginning of the year.

In response to the economic fallout of the novel

coronavirus pandemic, the GCC central banks followed

the global drive for an accommodative policy response

by cutting further their reference rates and issuing

support packages for their local economies.

The Saudi Arabian Monetary Authority (SAMA) cut its

rates by 75bps on top of the 50 bps cut earlier in the

month and issued a SAR 50 billion support package for

the local economy. The package is mainly targeted at

SMEs and is in the form of support for the local banking

system to defer payments for SMEs, provide funding at

zero interest to maintain employment levels, and loan

guarantees.

The Central Bank of the UAE followed a similar

approach by cutting rates by 75 bps and issuing a

Targeted Economic Support Scheme (TESS) of around

100 billion AED. The TESS is aimed at temporarily

relaxing regulatory banking ratios to free lending

capacity of banks and provide temporary relief from

the payment of loan installments for corporates, SMEs,

Chart 3: MSCI EM vs South Korea vs China

Source: Bloomberg (figures rebased)

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KOSPI 200 (SK)

Shanghai Composite

and Individuals. Qatar and Bahrain also reduced their

reference rates in line with the Federal Reserve. The

Central Bank of Bahrain cut its rates by 75bps while the

Qatar Central Bank cut its repo and deposit rates by

50bps and its lending rate by 1.0%.

In Kuwait, the Central Bank cut its discount rate by

1.0% to 1.50% on top of the 25bps earlier in the month.

It also issued a series of measures aimed at supporting

the economy by loosening regulatory requirements for

local banks and increasing liquidity levels in the system,

in addition to freezing debt and credit card payments

for up to six months for individuals and SMEs. The

Government supplemented these measures by

implementing a series of directives including

exemptions from, and postponement of, various

government fees, in addition to wage support for self-

employed Kuwaiti nationals, among other measures.

In terms of reaction to the current crisis, equity

markets in the GCC and wider MENA regions were

caught between the repercussions of the sudden stop

of economic activity and the collapse of oil prices after

the collapse of the OPEC+ agreement.

The S&P GCC composite lost 17.7% during March

compounding its first quarter losses to 24.8%, with the

markets in the UAE and Kuwait weighing down the

most. The wider S&P Pan Arab Index recorded declines

of 18.6% and 24.8% for March and Q1 respectively,

dragged further by the heavy losses in Egyptian

equities.

Dubai’s DFM General Index and Abu Dhabi’s ADX

General Index topped the list of decliners with 31.6%

and 23.8% for the month respectively. Losses in the

banking and real estate sectors were the heaviest in

the United Arab Emirates. Both sectors declined by

more than 34% for Dubai, while in Abu Dhabi banks

declined by 30% against declines of 26% for the real

estate sector. Also significantly affected were the

smaller consumer staples & discretionary and the

transportation sectors in Dubai which declined by 30%

and 31% respectively.

Chart 4: Performance of Dubai, Abu Dhabi, Qatar & Kuwait

Source: Bloomberg (figures rebased)

Kuwait saw the second heaviest declines among its

GCC peers. The broader Boursa Kuwait All Share Index

declined by 20.6% in March after losing 4% a month

earlier, bringing its total losses for the year to 23.2%.

The selling pressure was broad-based but stronger on

the blue-chip names causing the Premier Market Index

to underperform shedding 22.8% for the month.

Chart 5: Performance of Oman, KSA, & Bahrain

Source: Bloomberg (figures rebased)

Bahrain’s All Share Index and Oman’s MSM 30 index,

on the other hand, recorded losses of 18.7% and 16.5%

respectively.

In Saudi Arabia the Tadawul All Share Index was down

14.7% in March magnifying its year-to-date losses to

22.5%. The Saudi market did, however, outperform all

its GCC peers with the exception of the Qatar

Exchange. The capital goods and consumer services

sectors were the worst performers for the month

declining 27% and 24% respectively. Other heavy

weights recorded significant declines during March;

both the banking and the retailing sectors were down

around 20%, while the materials sector lost around

16%. Despite the broad based declines across the

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region, three sectors managed to close in green; the

telecom sector added 2.9%, while the food &

beverages sector was up marginally 1.4%. The top

performer was the smaller food & staples retailing

sector which added 11%.

Qatar Exchange Index was down 13.5% with the

heaviest losses sustained by the Industrials sector

which retreated by 17% in March dragged down mostly

by the decline in oil prices.

Source: Bloomberg

In the wider MENA region, the equity market in Egypt

sustained heavy losses with the EGX 30 registering the

steepest losses among MENA markers with a loss of

26.25%. This brings its total losses for the first quarter

to 31.3%. Elsewhere in MENA, Morocco’s MADEX index

declined by 21.3% for the month, while Jordan’s ASE

index registered losses of 9.1%.

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Chart 6: EGX 30 Index & EGP/USD

0.0625

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EGX 30 EGP/USD

Stock Market Performance – as of March 31, 2020:

Saudi Arabia Kuwait

Dubai Abu Dhabi

Qatar Oman

Bahrain Egypt

All indices are in local currencies, except for the S&P GCC and S&P Pan Arab, both of which are denominated in USD. Source: Bloomberg

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Market Data – as of March 31, 2020:

Equity* Last Price % Change

Monthly Quarterly YTD 1Yr Trailing Global MSCI AC World Index (USD) 442.35 -13.73% -21.74% -21.74% -14.00% MSCI EAFE (USD) 1,559.59 -13.82% -23.43% -23.43% -17.76% MSCI EM (USD) 848.58 -15.61% -23.87% -23.87% -20.70% US S&P 500 Index 2,584.59 -12.51% -20.00% -20.00% -9.86% Dow Jones Industrial Average 21,917.16 -13.74% -23.20% -23.20% -16.53% NASDAQ Composite Index 7,700.10 -10.12% -14.18% -14.18% -1.65% Russell 2000 Index 1,153.10 -21.90% -30.89% -30.89% -25.90% Developed Stoxx Europe 600 320.06 -14.80% -23.03% -23.03% -16.58% FTSE 100 Index 5,671.96 -13.81% -24.80% -24.80% -22.49% DAX Index 9,935.84 -16.4% -25.01% -25.01% -14.95% CAC 40 Index 4,396.12 -17.2% -26.46% -26.46% -18.67% Nikkei 225 18,917.01 -10.53% -20.04% -20.04% -12.05% Hang Seng Index 23,603.48 -9.67% -16.27% -16.27% -20.16% Emerging Markets Russia Stock Exchange 2,508.81 -9.92% -17.63% -17.63% -0.49% Turkey - Borsa Istanbul 100 Index 89,643.71 -15.43% -21.66% -21.66% -4.74% MSCI Asia ex Japan 560.22 -12.24% -18.60% -18.60% -16.46% Shanghai Composite 2,750.30 -4.51% -9.83% -9.83% -13.25% India - NIFTY 50 8,597.75 -23.25% -29.34% -29.34% -26.32% Taiwan Stock Exchange 9,708.06 -14.03% -19.08% -19.08% -8.78% Brazil Ibovespa Index 73,019.80 -29.90% -36.86% -36.86% -23.98% Mexico Stock Exchange 34,554.53 -16.38% -20.64% -20.64% -20.88% MENA S&P Pan Arab (USD) 593.19 -18.55% -24.79% -24.79% -25.09% S&P GCC Composite (USD) 109.78 -17.66% -24.81% -24.81% -26.63% KSA - Tadawul All Share Index 6,505.35 -14.72% -22.46% -22.46% -26.88% Dubai - DFM General Index 1,771.31 -31.61% -35.93% -35.93% -34.32% Abu Dhabi - ADX General Index 3,734.69 -23.80% -26.42% -26.42% -26.12% Qatar Exchange Index 8,207.24 -13.52% -21.28% -21.28% -19.18% Boursa Kuwait All Share Index 4,822.71 -20.58% -23.24% -23.24% -14.29% Oman - Muscat Securities Market 30 Index 3,448.29 -16.52% -13.39% -13.39% -12.94% Bahrain Bourse All Share Index 1,350.62 -18.66% -16.12% -16.12% -3.54% Egypt - EGX 30 9,593.94 -26.25% -31.28% -31.28% -35.84% Morocco - MADEX 7,876.80 -21.26% -20.59% -20.59% -11.66% Jordan - ASE Index 1,668.18 -9.14% -8.10% -8.10% -12.77%

*All Indices are in local currency, unless otherwise noted.

Source: Bloomberg

Market Data – as of March 31, 2020:

Fixed Income Last Price % Change

Monthly Quarterly YTD 1Yr Trailing Bond Indices J.P. Morgan Global Aggregate Bond (USD) 510.00 -2.24% -0.33% -0.33% 4.53% Barclays US Aggregate Bond 2,295.05 -0.59% 3.15% 3.15% 9.34% US Government Total Return Value Unhedged (USD) 2,522.24 2.84% 8.08% 8.08% 13.56% Bloomberg Barclays US Corp Bond Index 3,122.54 -7.09% -3.63% -3.63% 5.42%

Bloomberg Barclays US Corp High Yield Bond Index 1,905.89 -11.46% -12.68% -12.68% -7.11% Global Treasury ex US Total Return Index Value Unhedged 655.26 -2.55% -1.53% -1.53% 2.38% Global Agg Corporate Total Return Index Value Unhedged 263.44 -7.22% -5.42% -5.42% 1.52% JPM Emerging Market Bond Index (USD) 778.16 -12.55% -11.76% -11.76% -5.36% Bloomberg Barclays EM High Yield Bond Index (USD) 1,144.19 -16.95% -17.86% -17.86% -14.12% US Treasury Yields (%) Current 3 M ago 6 M ago 12 M ago 3 Month Yield 0.110 1.544 1.690 2.378 2 Year Yield 0.230 1.569 1.390 2.333 5 Year Yield 0.370 1.691 1.347 2.322 10 Year Yield 0.698 1.918 1.534 2.501 30 Year Yield 1.350 2.390 2.032 2.890 Global Treasury Yields (%) Current 3 M ago 6 M ago 12 M ago

British 10 Year Gilt 0.356 0.822 0.470 1.048 German 10 Year Bund -0.471 -0.186 -0.590 -0.026 Japan 10 Year Treasury 0.022 -0.011 -0.196 -0.073

Commodities Last Price % Change

Monthly Quarterly YTD 1Yr Trailing Precious Metals Gold Spot 1,577.18 -0.54% 3.95% 3.95% 22.48% Silver Spot 13.97 -16.15% -21.72% -21.72% -7.49%

WTI Crude 20.48 -54.24% -66.46% -66.46% -66.75% Brent Crude 22.74 -54.99% -65.55% -65.55% -67.05% Natural Gas 1.64 -2.61% -25.08% -25.08% -39.44%

Currencies Last Price % Change

Monthly Quarterly YTD 1Yr Trailing EUR-USD 1.103 0.05% -1.62% -1.62% -1.62% GBP-USD 1.242 -3.14% -6.31% -6.31% -5.21% USD-JPY 107.540 -0.32% -0.99% -0.99% -3.42% KWD-USD 3.188 -2.45% -3.41% -3.41% -2.98%

Interbank Rates (%) 1M 3M 6M 12M

London Interbank 0.993 1.451 1.175 0.998 Saudi Interbank 0.980 1.186 1.177 1.183 Emirates Interbank 1.219 1.726 1.385 1.392 Qatar Interbank 1.146 1.242 1.299 1.408 Kuwait Interbank 2.313 2.500 2.750 3.063

Source: Bloomberg

Energy

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