Rasmala: MENA equity markets gain 3.2% in August

H1 09 earnings for MENA markets indicate that earnings have yet to recover from the severe fall in earnings witnessed in the last quarter of 2008 - a result of the global financial crisis.

Generally, H1 09 earnings for companies in the UAE and Saudi Arabia are down approximately 40% compared to the same period last year.

Globally, the S&P 500 gained 3.4% in August as reports indicate that consumer confidence and home sales exceeded economists' forecasts. This is the sixth consecutive monthly gain, the longest series of increments since January 2007.

The UAE market gained 5.8% during the month led by Emaar Properties which rose 26.6% despite reporting a net loss of Dhs1.29bn in Q2 09. Total Q2 09 earnings for the largest 70 listed UAE companies fell by 47% compared to previous year and fell by 8.2% compared to previous quarter. Excluding losses reported by Emaar Properties and Union Properties, total UAE companies' Q2 09 earnings would have shown a 9.5% increase compared to previous quarter.

Saudi Arabia was the worst performing GCC market in August and was the only GCC market to record a decline during the month. The downtrend impacted all sectors including banks, petrochemicals, telecoms and real estate. This weak market performance occurred despite the top 70 companies on Tadawul reporting a 46% rise in earnings compared to previous quarter. Earnings in H1 09 are still 42% lower than in the same period last year.

Kuwait increased 3.1% bringing its year to date gains to 1.7%. Agility and Zain experienced the strongest growth. Moody's downgraded three Kuwaiti banks including National Bank of Kuwait, Burgan Bank and Gulf Bank. The rating agency indicated that the downgrades reflect weakening credit conditions in Kuwait and the banks' elevated exposure to real estate, construction and loans for purchasing securities.

Qatar rose 6% in August which was driven by the banking sector. The Qatari banks led the index to break the 7,000 resistance level earlier in the month, before the index retreated to close the month at 6,707. Index heavyweight Industries Qatar reported a net income of QR1.03bn in Q2 09, 10% lower than analysts' estimates; however the company's shares still gained 2.2%.

Total Q2 09 earnings for the largest 30 listed companies on DSM showed a slight increase of 1.0% compared to the previous quarter and a 14% decline from previous year.

The Omani market was the best performing GCC market in August gaining 8.5%. The market rally was fueled by higher oil prices and increased interest from institutions. Bank Muscat and National Bank of Oman gained 10.1% and 9.7% respectively. Oman International Bank reported OR5.4m in Q2 09 compared to OR6.4m in the previous quarter. Oman Telecommunications, which reported an 8.0% fall in Q2 09 net income, gained 5.4%.

The Egyptian market was the best performing Arab market in August and maintains its top position also for its year to date performance. The market gained 8.9% bringing its year to date growth to 46.3%. The strong market performance this month was largely driven by several positive macro developments and improved investors sentiment rather than corporate earnings, which were less impressive. Q2 09 earnings for listed companies fell by 1.8% compared to the previous quarter.