Kuwait Economic - GulfBase.comKuwait Economic Brief July 2011 Oil prices retreat from recent highs... Slow credit growth reflects soft private ... total real estate sales (Kd Mn) 3-month

An update of recent developments in select sectors in Kuwait published by Economic Researchat NBK

Kuwait Economic Brief

July 2011

Oil prices retreat from recent highs...Slow credit growth reflects soft private activity...

1

Kuwait’s crude oil price and production

Oil Output (left) Oil Price (right)

do

llars

per

bar

rel

mn

bar

rels

/day

2.25

2.30

2.35

2.40

2.45

2.50

Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

70

80

90

100

110

120

Kuwait stocK eXcHanGe

mill

ion

KD

ind

ex

Value of Traded Shares (left) KSE Index (right)

0

10

20

30

40

50

60

70

80

Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

6000

6500

7000

7500

total real estate sales (Kd Mn)

3-month average (LHS) Actual total sales (RHS)

50

100

150

200

250

300

350

400

50

100

150

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400

Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11

Monetary indicators(y/y percent growth)

Money Supply (M2) Credit Facilities

-5

0

5

10

15

May-10 Aug-10 Nov-10 Feb-11 May-11

oil Market...............................................page 2Crude prices drop after IEA releases emergency supplies

consumer price inflation .....................page 4Inflation currently around 5%, primarily on higher food prices…We expect inflation of 4.7% for 2011

Monetary developments......................page 5Credit falls in May…M2 shrinks while M1 expands

real estate.............................................page 6Strong sales in May underpinned by a surge in residential sector activity

corporate earnings...............................page 8Banks outperform...Wataniya’s nonrecurring gain boosts profits

Kuwait stock exchange......................page 12 Equities continue to flag as economic prospects fail to impress

Economic Brief - July 2011


2

Kuwait eXport crude

(dollars per barrel)

70

80

90

100

110

120

130

140

3Q10 4Q10 1Q11 2Q11 3Q11F 4Q11F 1Q12F

oil Market & Budget developments

Crude prices drop after IEA releases emergency supplies

Oil pricesSentiment towards crude oil prices weakened in June, though the mid-month price decline had been partially reversed by early July. The price of Kuwait Export Crude (KEC) fell from a peak of nearly $111 per barrel (pb) in mid-June to $99 pb by June 27th, before recovering to $105 a few days later. The price of Brent crude – Europe’s main benchmark oil – dipped from $121 to $105, before pushing back to $112 by the end of the month. The price of US West Texas Intermediate (WTI) crude continued to trade at a $15-20 discount to Brent, ending the month at $95.

The International Energy Agency’s (IEA) decision on June 23rd to release 60 million barrels of oil from its emergency stocks was the main catalyst for the drop in oil prices in the second half of the month. Some 2 million barrels per day were set to be released over 30 days in what the IEA said was an attempt to offset lost Libyan output. Yet the move also reflects discontent with OPEC’s refusal to increase production quotas at its meeting two weeks earlier, particularly in light of a seasonal increase in oil demand. The partial bounce in crude prices towards the end of the month may have been linked to weakness in the US dollar, as well as a belief that the impact of the IEA measure might not prove long-lasting.

These recent developments have come as enthusiasm for commodities more generally has waned over the past two months, causing prices to pull back from their April highs. The all-commodities CRB index has fallen 5% since mid-April - it’s largest correction in a year – as concerns over the fragility of the global economy have mounted. Note, however, that neither futures markets nor other forecasters are predicting meaningful price falls; speculative money seems merely to have stopped betting on further price increases. Futures markets, for example, still predict that Brent crude will remain very close to its current level through all of next year.

Oil demand outlookSeasonal changes aside, oil demand growth is seen as likely to decelerate in the second half of 2011, as global economic growth momentum slows and various policy tightening measures take effect. The Centre for Global Energy Studies (CGES), has revised down its forecasts for incremental demand in 2011 as a whole from 1 million barrels per day (mbpd) last month to an even more pessimistic 0.8 mbpd, or 0.9%. Part of this revision is linked to what it sees as mounting evidence that high oil prices are slowing demand, particularly in the OECD. The International Energy Agency (IEA), meanwhile, is more bullish, having left its growth forecast at 1.3 mbpd, or 1.5%. Within this overall forecast, demand from non-OECD countries is expected to grow by 1.5 mbpd, of which 0.9 mbpd is accounted for by China, India and Saudi Arabia. Note that other institutions are more positive still, seeing global growth of as much as 1.7 mbpd this year and another healthy increase in 2012.

Oil supply outlookCrude output of the OPEC 11 (i.e. excluding Iraq) surged by 147,000 bpd in May, thanks to big increases in Angola, Nigeria, Saudi Arabia and Venezuela. Production is still 1 mbpd below its January peak, however, thanks to the loss of 1.4 mbpd of Libyan output since then. The three main producers from the GCC – Saudi Arabia, Kuwait and the UAE – have accounted for all of the increase in non-Libya OPEC output over this period. These three countries were reportedly the ones that had pushed (unsuccessfully) for an increase in quota levels at OPEC’s acrimonious meeting in June. After significant gains last year, Iraqi output has also been stable since January.

Although Gulf countries may well ‘go it alone’ and raise production by themselves over coming months, the prospects for any meaningful year-on-year increase in OPEC-11 oil supplies this year look slim. Lost Libyan output is expected to remain off the market for the rest of the year – far longer than the temporary boost to supplies from the initial one-month release of emergency IEA stocks. Rising production in Iraq, however, could push production for OPEC as a whole somewhat above that in 2010.

Kec price scenarios (dollars per barrel)

scenario

low price Base case High price

2010 76.2 76.2 76.2

1Q11 99.4 99.4 99.4

FY10/11 82.5 82.5 82.5

2Q11f 109.3 109.3 109.3

3Q11f 101.9 111.8 116.3

4Q11f 93.2 113.6 125.3

2011f 100.9 108.5 112.6

1Q12f 85.4 109.0 129.0

FY11/12f 97.4 110.9 120.0

3

Meanwhile, non-OPEC oil supplies are expected to rise by between 0.8 and 1.2 mbpd, or just under 2%, on average this year. Around half of this will come from OPEC natural gas liquids, or NGLs. Of the rest, most will come from Latin America and the Former Soviet Union.

Price projectionsIn aggregate, the changes in supply might be enough to offset what could be a modest increase in global oil demand this year. But although this could reduce the drawdown in global stock levels, it might not be enough to eliminate it completely, given the scale of the drawdown in 2010.

Our base case scenario puts oil demand growth at 0.8 mbpd this year – the weaker end of the forecast range – while non-OPEC supply rises by 1 mbpd. Although Gulf OPEC countries are assumed to increase production during the second half of the year, they do so cautiously, and by less than needed to eliminate a stock draw. The price of KEC rises from $109 in 2Q11 to $114 by the end of the year. Weaker demand pushes prices back down below $110 at the start of 2012, however.

If economic conditions turn out much weaker than expected – perhaps the result of a sovereign debt meltdown in peripheral Europe or a sharper than expected slowdown in Chinese growth – global oil demand could be just 0.5 mbpd this year. OPEC would begin to reverse any earlier production increases by 4Q11, though might remain ‘behind the curve’. In this case, the price of KEC could be back below $90 pb by 1Q12.

On the other hand, non-OPEC supply could turn out weaker than anticipated, rising by 0.2 mbpd less than assumed above. This could be because of a bad hurricane season, or larger than expected production declines in existing fields, such as the North Sea. Under this scenario, the price of KEC accelerates throughout 2H11, reaching nearly $130 by the start of next year.

BudGet Forecast(million KD, unless otherwise noted)

under alternative oil price scenarios Fy 2010/11 Fy 2011/12

official low Base High prelim. low Base HighBudget case case case Budget case case case

Oil Price ($/barrel) 43.0 82.5 82.5 82.5 60.0 97.4 110.9 120.0

total revenues 9,719 20,908 20,908 20,908 13,445 23,668 27,304 31,039Oil Revenues 8,617 19,442 19,442 19,442 12,307 22,530 26,167 29,901Non-Oil Revenues 1,102 1,466 1,466 1,466 1,138 1,138 1,138 1,138

Expenditures (official) 16,160 16,160 16,160 16,160 19,435 19,435 19,435 19,435surplus (deficit) -6,441 4,748 4,748 4,748 -5,990 4,233 7,869 11,604

After RFFG -7,413 2,657 2,657 2,657 -7,335 1,866 5,139 8,500

Expenditures (NBK estimate) 16,502 16,098 15,694 18,463 17,977 17,492surplus (deficit), nBK estimate 4,406 4,810 5,214 5,205 9,327 13,547

After RFFG 2,315 2,719 3,123 2,838 6,597 10,443

Budget projectionsThe government’s closing accounts for FY 2010/11 have not yet been released. But based upon an oil price of $83, we expect the budget to have seen a surplus of around KD 5 billion before allocations to the Reserve Fund for Future Generations (RFFG). We estimate total government spending to have jumped to around KD 16.1 billion – a 43% increase on the previous year – thanks partly to the inclusion of an un-budgeted KD 1.1 billion in spending linked to February’s Amiri grant and a large intergovernmental social security transfer. The three oil price scenarios described above would generate average oil prices of between $97 and $120 per barrel for FY2011/12, an 18% to 46% increase on a year earlier. If, as we expect, spending comes in at 5-10% below the government’s forecast, the budget could see a surplus of between KD 5.2 billion and KD 13.6 billion before allocations to the RFFG. This would be Kuwait’s 13th successive budget surplus.


4

increases in global demand are among the main forces behind the rise in global food prices. Yet the advance in commodity food prices has abated in recent months and could be headed lower, thus providing some relief in 2H2011.

Taking a closer look at the food component of the CPI, two sub-categories stand out as the driving power for price increases: fruit and vegetable prices increased by 19.5% in April 2011 (y/y), while meat, poultry and fish increased by 8.7%.

As for housing services, price inflation oscillated around the 5% mark between July 2010 and April 2011. This is only marginally higher than the first half of 2010, but is still a long way from the double-digit rates of 2007/8. Housing CPI rates are also expected to remain steady or decelerate as new housing supply materializes.

Prices in the transportation sector (airfares, cars) witnessed a decline during the financial crisis period. The weak trend for cars continued even after the economy started showing signs of recovery in 2010.

Car prices, a major component of the transportation sector, were negative compared to year-ago levels for most of 2009 and 2010. They were flat or unchanged y/y in March and April and are expected to see little upward pressure this year.

With steady or slightly lower pressure on prices later in 2011, we expect CPI inflation of 4.7% this year.

consumer price inflation

Inflation currently around 5%, primarily on higher food prices…We expect inflation of 4.7% for 2011 CPI inflation registered 5.3% (y/y) in April, off the recent high of 6.0% in December 2010 (chart 1). Higher food prices remain the primary source of price pressure. These were up 11% y/y and food was the only category posting a double-digit pace. Excluding food prices, (core) inflation was at 3.8% in April (y/y). We expect CPI inflation to average 4.7% this year, following 4.0% in 2010.

Higher food prices have carried over from last year but in a somewhat less potent manner. The year-to-year increase has hovered a shade over 5% in recent months, while m/m saw movements in both directions, resulting in an average month-to-month rate of 0.1%. This signifies the general outlook of this report in that there is no major uptick in inflation rates, just a near-term rise largely due to global food prices.

Weather disruptions, more crops diverted to bio-fuels, and

consuMer price inFlation

Index % m/m % y/y

Weight

% Feb Mar apr Feb Mar apr

Food 18.3 -0.5 1.3 0.8 9.3 9.9 11.0

Beverages & tobacco 0.7 -0.2 0.9 0.0 -6.1 -4.7 -4.8

Clothing & footwear 8.9 0.3 0.6 -0.3 4.3 4.9 4.2

Housing services 26.8 0.0 0.4 0.0 5.6 4.5 4.5

Household goods & services 14.7 0.0 0.3 0.0 4.4 4.6 4.6

Transport & Commn. 16.1 0.1 0.0 0.0 1.4 1.4 1.3

Education & Medical care 4.7 0.3 0.3 -0.1 4.3 4.7 4.7

Other goods & services 9.9 0.1 0.2 0.7 5.6 3.3 4.0

General Index 100.0 -0.1 0.5 0.2 5.3 5.1 5.3

Source: CSO / NBK

Food & HousinG inFlation, % y/y

CPI Food CPI Housing

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Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

0

2

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6

8

10

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14

cpi coMponents, % y/y

Apr-11 2010 Avg

Food

Clo

thin

g

H's

ing

serv CPI

Oth

erG

&S

H'h

old

g'ds

Edu

&

Tran

&co

m

Med

Source: Ministry of Planning / NBK

-6

-4

-2

0

2

4

6

8

10

12

-6

-4

-2

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6

8

10

12

Bev

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consuMer price inFlation, % y/y

CPI CPI excl food

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8


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5

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7

8

transportation inFlation, % y/y

CPI Transportation CPI Cars

-10

-8

-6

-4

-2

0

2


-8

-10

-6

-4

-2

0

2

Monetary developments

Credit falls in May…M2 shrinks while M1 expands Money supply (M2) declined 0.6% m/m in May (-KD 166 million), while M1 expanded 1.3% m/m following a shift from time and foreign currency deposits to sight. Meanwhile, an outflow of funds from the system was marked by a drop in the Central Bank of Kuwait’s (CBK) foreign assets of KD 241 million.

Low interest rates continue to drive the shift from long term deposits to sight. In May, M1 y/y growth stood at 22.3%, well above a y/y growth of 6.5% in M2. Outstanding credit to residents fell KD 123 million in May, its first notable m/m decline this year. It’s off 0.2% (KD 48 million) since December 2010. On the year, credit is down 0.3%, its first negative reading in 2011.

Personal facilities remain the only sector with some steady, albeit modest growth. In May, personal facilities were up KD 52 million, 0.6%. Y/Y growth in this sector is 1.3%. However, outside of securities related credit, personal facilities are up 4.1% from a year ago and 2.2% ytd, reflecting a healthy household/consumer sector.

Apart from personal facilities, almost all other sectors were down or at best flat in May. Credit to productive sectors (trade, industry, construction) was down KD 118 million. Mostly credit to all other business related sectors was also off in May.

Monetary HiGHliGHts - May 2011change

May 2011 mom 3-mnth yoymn KD % % %

local Bank assets 42,111 -0.9 -1.1 3.1of which:

Claims on Government 1,937 1.9 3.1 2.2Credit to Residents 25,152 -0.5 -0.4 -0.3Foreign Assets 6,602 -5.1 -9.8 -4.1

Money supply (M2) 26,913 -0.6 -0.3 6.5Private Deposits 25,929 -0.6 0.0 6.1

KD Sight Deposits 5,883 1.9 10.1 24.7KD Savings Deposits 3,651 2.0 7.0 20.9KD Time Deposits & CDs 14,620 -0.3 -2.0 -0.1FC Deposits 1,775 -13.5 -21.0 -14.3

eXcHanGe rates

Dinar/Dollar (LHS) Dinar/Euro (RHS)

0.26

0.27

0.28

0.29

0.30

0.31

0.32

Oct-08 Mar-09 Jul-09 Dec-09 Apr-10 Sep-10 Jan-11 Jun-11

0.33

0.35

0.37

0.39

0.41

0.43

0.45

Monetary indicators (year-on-year percent growth)

Money Supply (M2) KD Resident DepositsCredit Facilities

-5

0

5

10

15

20

25

May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11

Resident deposits fell 0.6% m/m (-KD 149 million). The decline came mostly from a drop in foreign currency deposits (-KD 278 million) but local currency time deposits fell as well.

Banks’ liquid assets rose KD 27 million in May mostly from increases in cash and current CBK balances, while time deposits at CBK were off KD 88 million. Total assets fell KD 392 million due to declines in banks’ foreign assets and credit to residents. Ample liquidity continued to put pressure on interest rates. Average rates offered on KD private deposits fell 2-4 bps across maturities. The 1-month, 3-month, 6-month, and 12-month rates were 0.91%, 1.10%, 1.37%, and 1.66% respectively.

5


6

real estate

Strong sales in May underpinned by a surge in residential sector activity The total value of real estate transactions in May reached KD 300 million. While this was a drop of 23% from the previous month, sales in May were still almost 20% higher than in the same month last year. Also, compared to last year, 2011’s monthly average of KD 270 million in real estate sales is an increase of almost 63%. The total volume of real estate transactions in May, at 914, was the highest monthly figure since July 2007.

The residential sector experienced a surge in activity in May with 721 transactions logged. This was a 52% increase over the previous month. These transactions totaled KD 180 million, a decline of 23% from April. Much of the increase in volume was on account of puchases of

plots of land for private use in the Abu Futaira district—where 130 plots (avg size of 607 m2) worth KD 26.7 million were bought—and in the Funaitees and Sabah al-Ahmad (coastal) areas.

In the investment sector (apartments and buildings) the number of units sold in May increased by almost 27% over April to register 180. In contrast, sales decreased by 23% from the previous month to level at KD 84 million. Salmiya, Mahboula and Sabah al-Salem were the districts in which investment sector activity was greatest: Salmiya and Mahboula for apartments costing on average KD 46,000 (KD 719 per m2) and KD 52,000 (KD 393 per m2) respectively, and Sabah al-Salem for plots of land that were being sold for an average of KD 559,000 (KD 592 per m2). Salmiya also witnessed signficant activity

real estate sales & scB HousinG loans Monthly avg. Mar apr May % %

real estate sales 2009 2010 2011 2011 2011 M/M y/y

sales Values (mn Kd) 108.7 166.1 249.5 391.6 300.1 -23.4 19.5Residential Property 55.5 91.7 134.0 233.1 180.1 -22.8 20.5Apartments 36.9 54.4 85.0 109.0 84.1 -22.9 -6.6Commercial 16.3 20.0 30.5 49.5 36.0 -27.3 208.0

number of transactions 382 561 862 629 914 45.3 6.7Residential Property 277 425 715 475 721 51.8 14.1Apartments 100 130 135 142 180 26.8 -16.3Commercial 6 6 12 12 13 8.3 30.0

average transaction size (000 Kd) 281.2 302.2 289.4 622.6 328.3 -47.3 12.0Residential Property 199.3 215.8 187.4 490.8 249.7 -49.1 5.6Apartments 373.3 437.4 629.8 767.8 467.1 -39.2 11.5Commercial 2880.6 3295.2 2542.9 4121.8 2767.2 -32.9 136.9

Monthly avg. Mar apr May % %scB Housing loans 2009 2010 2011 2011 2011 M/M y/y

Value of approved loans (mn Kd) 13.5 7.8 7.4 6.3 6.5 2.8 -30.5New Construction 8.0 2.3 1.7 2.0 1.5 -23.5 -33.0Purchase of Existing Homes 3.9 3.9 3.4 2.9 3.6 25.7 -29.2Additions & Renovations 1.6 1.6 2.3 1.5 1.4 -6.5 -30.9

number of approved loans 371 265 202 172 161 -6.4 -51.7New Construction 126 44 28 38 26 -31.6 -48.0Purchase of Existing Homes 77 83 71 57 64 12.3 -37.9Additions & Renovations 167 138 103 77 71 -7.8 -60.6

Value of disbursed loans (mn Kd) 12.8 11.4 8.7 7.9 10.4 31.6 -16.3New Construction 7.8 5.9 4.7 3.9 5.5 38.8 -16.1Purchase of Existing Homes 3.3 3.7 2.2 2.3 3.3 47.5 -12.0Additions & Renovations 1.6 1.7 1.7 1.7 1.6 -5.9 -24.3Source: Ministry of Justice and the Savings and Credit Bank

residential real estate

Avg. transaction size (KD 000s, RHS) Sales (KD mn, LHS)

20

60

100

140

180

220

260


150

200

250

300

350

400

450

500

550

inVestMent real estate (apts & BldGs)

Avg. transaction size (KD 000s, RHS) Sales (KD mn, LHS)

20

40

60

80

100

120

140


200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

7

in buildings sales, where 16 transactions ocurred in May totalling KD 17.2 million.

In the commercial sector there were 13 transactions totaling KD 36 million in May. This was a 27% drop in the value of sales compared to the previous month. Commercial real estate activity was greatest in the coastal Sabah al-Ahmad district, where 3 plots of land were acquired, and in Khaitan, where one complex was bought for KD 6 million.

Savings and Credit Bank (SCB) loans with a combined value of KD 6.5 million were approved in May. The number of new loans approved per month is now at an all time low.

scB loan approVals

Number of loans (LHS) KD value of loans (% y/y, RHS)

-100

-50

0

50

100

150

200

250

300

150

200

250

300

350

400

450

500

550

600

650

2009 2010 2011

coMMercial real estate

Avg. transaction size (KD 000s, RHS) Sales (KD mn LHS)

0

10

20

30

40

50

60

70

80


0

2

4

6

8

10

12

14

16

18

20

22


8

sector perForMance(million KD) net profits

Growth %2011 2010

Banking 156 131 20

Investment -34 1 ...

Insurance 6 11 -49

Real Estate -1 13 ...

Industrial 25 66 -62

Services 363 117 211

Food 15 19 -18

Non-Kuwaiti Companies 34 42 -20

total Market 564 399 41

Kuwaiti companies 530 357 49

coMpany proFits - 1Q 2011

Highest earnings million Kd

1. National Mobile Telecommunications 285.2

2. National Bank of Kuwait 80.8

3. Zain 53.6

4. Kuwait Finance House 22.6

5. Ahli United Bank 21.5

lowest earnings million Kd

1. Global Investment House -22.0

2. National Ranges Co. -5.6

3. Coast Investment & Development -5.2

4. Kuwait Business Town real estate -4.9

5. Kwt Pipes Industries & Oil Services -4.7

corporate earnings

Banks outperform...Wataniya’s nonrecurring gain boosts profitsCorporate earnings of 183 companies totaled KD 587 million in 1Q11, well above a year before. Noticeably, Wataniya Telecom’s one time gain from asset revaluation was a major boost to total earnings. Excluding this nonrecurring gain, Kuwait Stock Exchange (KSE) listed companies saw a decline in 1Q11 earnings compared to 1Q10.

On a same company basis, 170 companies that reported profits in both 1Q11 and 1Q10 saw a growth of 41%. However, excluding Wataniya Telecom’s KD 265.5 million profits from revaluation of existing interest held in Tunisia, same company earnings show a decrease of 25%. For the sake of comparison, the following analysis will exclude this onetime gain.

Outside of banks, all sectors were down on the year. The investment and real estate sectors moved back into negative territory after having had a profitable 1Q10. The industrial sector also saw a major decline in profits with a drop of 62% followed by the insurance sector which declined by 50%. Meanwhile, banking sector earnings were up 20% on the year with all banks recording positive earnings. Growth in bank profits in 1Q11 was largely attributed to lower provisions than previous accounting periods.

Kuwait’s two largest banks, National Bank of Kuwait and Kuwait Finance House, were among the best performers, with National Bank of Kuwait topping the list of highest earners at KD 80.8 million (again, this ranking is adjusted for Wataniya Telecom’s one time gain). On the biggest losers end, Global Investment House still tops the list. It’s worth noting that more than 30 companies (mostly investment) have yet to report interim results, thus losses may well be understated.

9

corporate earninGs - 1Q 2011(thousand KD)

Code Company Name First Quarter Growth2011 2010 %

Banking101 National Bank of Kuwait 80,792 76,260 6102 Gulf Bank 9,779 524 1,766103 Commercial Bank 1,332 -1,454 …104 Al-Ahli Bank 16,296 15,283 7105 Ahli United Bank 8,527 6,244 37106 Kuwait International Bank 3,009 291 934107 Burgan Bank 11,822 1,062 1,013108 Kuwait Finance House 22,625 30,905 -27109 Boubyan Bank 2,112 1,620 30Investment201 Kuwait Investment Co. … 5,988 …202 Commercial Facilities 3,334 5,283 -37203 International Financial Advisors 409 -3,372 …204 National Investments -1,018 3,456 …205 Kuwait Projects Company (Holding) 8,058 4,722 71206 Al-Ahlia Investment -1,444 … …207 Coast Investment & Development -5,157 5,414 …208 The International Investor … … …209 Securities House … … …210 Industrial & Financial Investments … -161 …211 Securities Group … … …212 International Finance Co. -2,028 -947 …213 Kuwait Financial Centre -748 3,721 …214 KMEFIC -1,243 -1,718 …215 International Investment Group … … …216 Aref Investment Group … -4,464 …217 Al-Dar Investment … … …218 Al-Aman Investment 71 1,509 -95219 First Investment Co. -195 -2,128 …220 Al-Mal Investment -4,064 -1,405 …221 Gulf Investment House -785 -1,232 …222 A’ayan Leasing & Investment Co. … … …223 Bayan Investment Co. -3,793 -1,862 …224 Global Investment House -22,032 -14,173 …225 Osoul Leasing & Investment Co. -239 -251 …226 GulfInvest -897 … …227 Kuwait Finance & Investments Co. … 1,095 …228 KIPCO Asset Management Co. 214 1,023 -79229 International Leasing & Investment Co. … … …231 National International Co. (Holding) -472 153 …232 Housing Finance -1,579 30 …233 Al Madar Finance & Investment … -3,224 …234 Al-Deera Holding Co. -2,168 -1,331 …235 Al Safat Investment … 1,231 …236 Al Salam Group Holding Company 32 -314 …237 EKTTITAB Holding Company -2,600 -335 …238 Al Qurain Holding Company -1,605 -2,588 …239 Sokouk Holding … -588 …240 Al Madina for Finance & Investment -430 -181 …241 Noor Financial Investment … 658 …242 Al Tamdeen Investment 2,230 3,334 -33243 Kuwait Bahrain International Exchange 20 241 -92244 DAMAC Kuwaiti Holding 664 1,535 -57245 KUWAIT SYRIAN HOLDING -463 350 …246 Strategia Investment co. 109 -27 …247 Kuwait China Investment Co. 1,872 1,073 74248 Manafae Investment Co. -411 24 …249 Gulf North Africa Holding Co. -151 509 …250 Amwal International Investment Co. -32 143 …251 Al-Masar Leasing & Investment Co. K.S.C … … …252 Al-Imtiaz Investment Co 11,304 … …Insurance301 Kuwait Insurance 2,264 2,500 -9302 Gulf Insurance 2,045 2,568 -20303 Al-Ahlia Insurance 1,379 2,413 -43304 Warba Insurance 908 1,975 -54305 Kuwait Re-Insurance -992 558 …306 First Takaful Insurance 1 28 -96307 Wethaq Takaful Insurance Co. -102 788 …Real Estate401 Kuwait Real Estate 1,893 975 94402 United Real Estate 1,259 2,394 -47403 National Real Estate 886 5,982 -85


10



404 Salhia Real Estate 1,866 2,528 -26405 Pearl of Kuwait Real Estate -1,164 … …406 Al-Tamdeen Real Estate 1,719 2,059 -17408 Ajyal Real Estate Entertainment Co. -763 34 …409 Al-Massaleh Real Estate Co. -61 217 …410 Arab Real Estate -670 -3,044 …411 Union Real Estate 319 315 1412 Enma’a Real Estate - - …413 Mabanee Co. 5,777 5,251 10414 Injazzat Real Estate Development 1 3 -57416 Investors Holding Group -3,871 … …417 International Resorts Co. -259 -488 …418 Commercial Real Estate Co. 1,352 2,851 -53419 Sanam Real Estate Co. -127 215 …420 A’ayan Real Estate Co. -760 274 …421 Aqar Real Estate 72 47 54422 Kuwait Real Estate Holding -116 146 …423 Al Mazaya Holding -968 2,120 …424 Al Dar National Real Estate 111 -1,130 …425 Al-Themar International Holding 5,976 … …426 Grand Real Estate Projects - - …427 Tijara & Real Estate Investment 509 40 1,175428 Tameer Real Estate Investment -113 -314 …429 Arkan Al-Kuwait Real Estate … - …430 Safat Global Holding … - …431 Al-Argan International Real Estate 354 341 4432 Abyarr Real Estate Development Co. -873 -911 …433 Munshaat Real Estate Projects Co. … -3,434 …434 First Dubai For Real Estate Development -436 1,235 …435 Kuwait Business Town real estate -4,872 -7,420 …436 Manazel Holding Co. -890 -524 …437 Real Estate Asset Managemnet Co - Ream 252 163 55438 Mena Real Estate Co. -6,081 - …439 Al Mudon International Real Estate 13 4 208440 Real Estate Trade Centers -238 … …441 Kuwait Remal Real Estate 1,748 … …

Industrial501 National Industries 620 41,322 -98502 Kwt Pipes Industries & Oil Services -4,707 2,256 …503 Kuwait Cement 4,880 13,928 -65504 Refrigeration Industries 81 134 -39505 Gulf Cable & Electrical Industries 5,886 … …506 Heavy Engineering Ind. & Shipbuilding 1,077 -754 …507 Contracting & Marine Services 379 -332 …508 Kuwait Portland Cement -673 4,308 …509 Shuaiba Paper Products 235 103 129510 Metal & Recycling 220 119 85511 Kuwait Foundry 552 492 12512 Aerated Concrete Industries 713 2,809 -75513 United Industries 1,239 2,991 -59514 Boubyan Petrochemical Co. … … …515 Gulf Glass Manufacturing 537 … …516 Al-Hilal Cement 390 799 -51517 Al Kout Industrial Projects Co. 700 … …518 Kuwait Packaging Materials Manufac. 291 -64 …519 Kuwait Building Materials Manufac. 31 … …520 National Industries Co. for Bldg. 1,941 9,024 -78521 Gulf Rocks Co. -2,388 … …522 Equipment Holding 282 1,295 -78523 Mena Holding … -306 …524 National Co. for Consumer Industries -41 -47 …525 Kuwait Gypsum Manuf. & Trading 40 -12 …526 Qurain Petrochemical Industries 18,163 -5,538 …527 Salbookh Trading Co. -752 -319 …528 IKARUS Petroleum Industries 201 -6,490 …

Services601 Kuwait Cinema 1,617 1,604 1602 Kuwait Hotels 219 353 -38603 Agility 7,705 17,588 -56604 Kuwait Commercial Markets Complex -1,689 -1,609 …605 Zain Kuwait 53,600 51,542 4606 Al Safat Energy Holding Company 56 504 -89607 Educational Holding Group 388 -896 …

11



608 Independent Petroleum Group 1,619 1,792 -10609 National Cleaning Co. 346 310 12610 The Sultan Center -2,919 2,571 …611 Al-Arabi Holding 179 175 2612 City Group Company 219 642 -66613 Wataniya 285,168 16,206 1,660614 Kuwait & Gulf Link Transport Co. -4,666 1,906 …615 Kuwait Cable Vision -481 -107 …616 Automated Systems Co. 200 433 -54617 National Petroleum Services Co. 726 293 148618 Kuwait Co. For Process Plant Cons.& Cont. 311 1,004 -69619 Kuwait Slaughter House 208 134 55620 EYAS for Higher & Technical Education 1,913 213 798621 Nibras Holding Co 148 53 182622 Al Safwa Group -3,684 2,058 …623 Human Soft Holding 212 -10 …624 Kuwait Privatization Project Holding … 1,008 …625 Nafais Holding Company 5,771 -737 …626 National Slaughter House 97 37 161627 Aref Energy Holding -633 13,347 …628 Safwan Trading & Contracting 493 366 35629 Gulf Petroleum Investment 629 -819 …630 Gulf Franchising -189 -282 …631 Credit Rating and Collection 93 23 305632 National Ranges Co. -5,598 -951 …633 Burgan Co. for Well Drilling 145 2,167 -93634 IFA Hotels & Resorts 4,283 -4,570 …635 Combined Group Contracting 2,887 2,400 20636 Jeeran Holding … … …637 Palms Agro Production 67 361 -81638 Al-Safat Tec Holding Co. -743 626 …639 Mushrif Trading & Contracting 550 377 46640 United Projects Group 197 1,354 -85641 Al Abraj Holding … … …642 Aviation Lease & Finance 3,601 2,788 29643 Al-Mowasat Holding 476 127 274644 Mashaer Holding Company 1,348 605 123645 Oula Fuel Marketing Company 956 927 3646 Villa Moda Life Style … … …647 Future Communications 603 633 -5648 Network Holding Company … … …649 Hayat Communication Co. -941 -344 …650 Mubarrad Transport Co. -73 -114 …651 Kuwait Resorts Co. 614 9 6,913652 Advanced Technology Co. 923 1,112 -17653 Yiaco Medical Company 1,683 1,794 -6654 Jazeera Airways Co. 1,184 -4,499 …655 Al Sour 1,008 1,313 -23656 Wataniya Airways … -3,074 …657 Future Kid 14 30 -53658 KGL Logistics Company 2,272 1,979 15659 AL-Nawadi Holding Co. … … …660 ALRai Media Group Company K.S.C 628 … …661 ZIMA Holding Company 6 … …

Food701 Livestock Trading & Transport -1,423 1,059 …702 Danah Alsafat Foodstuff Company -1,199 2,303 …703 United Poultry 638 306 108704 Kuwait Food Co (Americana) 15,947 13,870 15705 United Foodstuff Industries 218 135 61706 Kout Food Group 1,070 913 17

Non Kuwaities804 Sharjah Cement & Industrial Dev. 518 1,879 -72805 Gulf Cement -1,375 4,498 …806 Umm Al-Qaiwain Cement Industries 173 1,326 -87807 Fujairah Cement Industries -202 17 …808 Ras Al-Khaimah for White Cement 1,515 1,692 -10809 Arab Insurance Group 179 1,301 -86810 United Gulf Bank 1,338 2,166 -38811 Egypt Kuwait Holding 8,361 9,411 -11812 Bahrain Kuwait Insurance 837 1,004 -17813 Gulf Finance House … -2,164 …817 Inovest -304 -1,436 …818 Ahli United Bank 21,481 18,971 13820 Ithmaar Bank 982 1,231 -20


12

Kuwait stock exchange

Equities continue to flag as economic prospects fail to impressIn June, the Kuwait Stock Exchange (KSE) suffered further losses, dragging the price index down 2.6% this month and 10.7% from the beginning of the year. The value weighted index was down a smaller 2.2% for the month. An unimpressive economic outlook confirmed by poor corporate earnings figures appears to be weighing heavily on equities Despite the government’s huge budget surplus, the market still seems to lack a positive catalyst. The continued absence of political agreement has slowed progress on the development plan, which was expected to begin reviving Kuwait’s economy in 2011. Instead, bank lending has fallen so far this year, indicating lackluster private sector activity. Weak corporate profit figures for the first half of 2011 are also driving investors to seek opportunities elsewhere. The failure of the Zain-Etisalat deal had a negative impact on the market especially stocks of companies and banks expected to benefit from the deal.

All sector indices declined on a price-weighted basis during the month with the exception of the insurance sector which showed no change. The investment sector was the worst performing falling by 4.1%. The drop comes in the wake

of new regulations requiring the separation of the lending and investment activities of investment companies. With the formation of the Capital Markets Authority (CMA), investment activities will fall on their supervision.

Trading activity also dropped markedly in June. The daily average traded value was KD 17.1 million, down a remarkable 40% from May.

Kse perForMance By sector, june 2011

price- % change in Kse index Market cap. % of trading activity price to

Kse index price-weighted Value-weighted (million KD) Market (daily average) earnings +

29-Jun-11 Jun-11 YTD 10 Jun-11 YTD 10 29-Jun-11 29-Jun-11 mn shares mn KD 29-Jun-11

Banking 11,830 -2.9 -0.5 -3.1 -5.2 13,598 44.0% 8.5 4.8 24Investment 3,959 -4.1 -18.6 -4.0 -19.4 2,248 7.3% 17.8 1.6 ...Insurance 2,597 0.0 -3.7 0.1 -2.4 307 1.0% 0.0 0.0 12Real Estate 2,132 -2.2 -9.5 -0.9 -8.8 1,671 5.4% 28.9 2.7 ...Industrial 4,469 -1.1 -16.0 -0.8 -15.8 2,355 7.6% 6.3 1.8 17Services 14,127 -3.2 -7.8 -1.0 -15.1 8,030 26.0% 32.9 5.4 6Food 4,344 -0.3 -6.3 1.9 0.0 756 2.4% 0.5 0.1 13Non-Kuwaiti 6,185 -3.1 -15.0 -2.2 -12.4 1,913 6.2% 7.7 0.7 12total Market 6,212 -2.6 -10.7 -2.2 -10.5 30,877 100.0% 102.5 17.1 11Kuwaiti companies 28,964Source: Kuwait Stock Exchange and Zawya.

Note: * PE is calculated using market cap as of month close and 12 months trailing earnings.

Kse daily perForMance

mill

ion

KD

inde

x

Value of Traded Shares (left) KSE Index (right)

6200

6250

6300

6350

6400

2927232119151397510

5

10

15

20

25

30

35

40

June 2011

reGional MarKets reBased perForMance

S&P Kuwait S&P Pan ArabS&P GCC

95

100

105

110

115

120

125

130

135

Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11

Kse reBased perForMance

Value Weighted (LHS) Price Index (RHS)

90

100

110

120

130

Jun.10 Aug.10 Oct.10 Dec.10 Feb.11 Apr.11 Jun.11

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