The GCC markets experienced a turbulent 2008 that resulted in all the markets closing the year with significant double-digit declines. Kuwait Financial Centre in its report on the Gulf stock markets' performance that the year again highlighted the correlation between markets and oil prices, which after hitting an all-time high of $147 per barrel in July 2008, corrected by over 70 percent by December 2008. Saudi stocks fell three percent on Saturday as the slowing economy in the oil superpower and global economic stress continued to dampen investor sentiment. Tadawul All-Shares Index dropped 161.57 points to close down 3.04 percent at 5,160.65. Petrochemicals giant SABIC lost 3.84 percent to close at SR56.25 ($15.00), after trading as low as SR54.75. Developer Emaar fell 7.27 percent to SR2.42 (65 cents), while a buoyant profits report pushed Alinma Bank shares higher by 3.41 percent to close at SR12.1 ($3.23). Financial stocks were off nearly three percent amid news that six finance companies were weighing a merger as the slower economy takes its toll on business turnover. At the close on Saturday, the Saudi market, the largest in the Gulf, was 56 percent below its 52-week high of 11,697 on Jan. 12, 2008, but well above last year's low of 4,224 on Nov. 23. The Saudi market trades on a Saturday-to-Wednesday week, while others in Arab states of the Gulf trade from Sunday to Thursday. The first half of 2008 witnessed GCC markets combating rising inflation fuelled by strong oil prices and currencies pegged to the US dollar. However, the tide turned in the second half, largely because of oil and other commodity prices beating a hasty retreat, as recession roiled the developed economies, thereby forcing the high-growth emerging economies to slow down. Saudi Arabia's Tadawul All-Share Index (TASI) was one of the worst performers among the GCC markets during 2008, shedding 56.5 percent from the start of the year as the economy experienced a severe slowdown in the second half of 2008, due to the significant decline in oil prices and the global credit crisis. The Insurance and Multi-investment indices declined by 73.7 percent and 67.0 percent, respectively, in 2008. The volatility in crude oil prices was reflected in the Petrochemical index. During the first half of 2008, as crude prices rose to record levels the Petrochemical index grew marginally by 0.5 percent, while during the second half when the crude prices corrected more than 70 percent from their peak, the Petrochemical index declined by 65.8 percent. During December, TASI exhibited a gain of 1.4 percent MoM. This was TASI's first positive performance after three consecutive months of losses. The growth during December resulted in the market continuing to trade at 8 times its forward earnings. For the year 2008, the total volume and value traded stood at approximately 58.5 billion and $522.4 billion, respectively. While the volume traded rose by 1.2 percent YoY, value traded fell by 23.0 percent YoY in 2008. During the year, most of the GCC countries reiterated their commitment to the dollar peg. That, coupled with the decline in oil prices, led to a large number of investors, who were betting on continued gains from high oil prices and a possible de-pegging of currencies, exiting the markets. Consequently, GCC markets plunged on a YTD basis by 57 percent in 2008. On a comparative basis, both volume and value traded declined across all the GCC markets in 2008. The total volume traded in the GCC declined to 275.6 billion shares in 2008 from 292.6 billion shares in 2007. The total value traded also declined by 10.6 percent in 2008 ($860.3 billion in 2008 against $962.7 billion in 2007). In December, GCC markets recorded a MoM decline of 8.0 percent as compared to the 13.8 percent decline seen in November. Emerging markets on the other hand gained 7.6 percent during December. The loss in December resulted in YTD losses for the GCC markets further widening to 57.0 percent. Emerging markets outperformed the GCC markets in December with lower YTD losses of 54.5 percent. The year 2008 can also be called as “year of volatility”, especially in GCC. During the year, volatility levels (as measured by Markaz Volatility Index) spiked up by 75 percent, with September being the most volatile month. During September, volatility nearly tripled. However, during the closing month of December, volatility levels cooled off significantly. It is interesting to note that increase in volatility is almost always accompanied by reduced market returns and vice versa. Correlations among GCC markets continue to edge higher in tandem with common set of crisis being faced by the markets. However, compared to US markets (S&P 500) correlations continue to be attractive and in certain cases (Kuwait, Oman, Bahrain, & Qatar) continues to be either negative or close to zero. The Kuwait Index in line with other GCC markets lost heavily during the year, declining 38.0 percent YTD. The Investment index mirroring the turmoil in the financial markets across the globe declined 53.2 percent. The Food index also declined 47.6 percent, as commodity prices, which were on an uptrend in the first half of 2008, cooled off significantly during the second half. The Insurance index was the only index that managed to remain relatively flat in 2008, declining just 3.6 percent. The heavy decline during December in the Kuwait Price Index resulted in a 25 percent contraction in the market's P/E multiple, with the market trading at 6 times its forward earnings. The total volume traded in Kuwait increased by 14.8 percent in 2008 (80.8 billion in 2008 vis-à-vis 70.4 billion in 2007), whereas the total value traded decreased to $134.0 billion in 2008 from $138.8 billion in 2007. The UAE markets were among the most affected by the global credit crisis of 2008, with the DFM shedding 72.4 percent during the year and the ADX losing 47.5 percent. The UAE General Index was down 56.6 percent on YTD basis. The DFM's performance during 2008 was the worst in the GCC region. The utilities, real estate, and investment & financial services segments were the biggest losers on the DFM during 2008, declining by 83.7 percent, 82.6 percent and 69.9 percent, respectively. The ADX's performance during 2008 was largely dictated by the Energy index (down 70.4 percent) and Real Estate index (down 66.8 percent). Trading activity in Dubai and Abu Dhabi declined significantly. The total volume traded in UAE during 2008 increased 13.8 percent (126 billion in 2008 compared to 110.7 billion in 2007), whereas the total value traded increased 32.1 percent ($145.8 billion in 2008 from $110.3 billion in 2007). Qatar's Doha Stock Market was down 28.1 percent during 2008. The total volume of shares traded stood at 3.7 billion as compared to 3.4 billion shares in 2007. The total value of shares traded during the year increased 58.0 percent to $47.3 billion. Muscat Securities Market's total volume traded increased by 37.4 percent (4.1 billion in 2008 against 3 billion in 2007) while the total value traded increased by 66.3 percent ($8.6 billion in 2008 from $5.2 billion in 2007). In 2008, total volume traded in Bahrain Stock Market stood at 1.6 billion, with the total value traded increased 136.6 percent from $0.9 billion in 2007 to $2.2 billion in 2008. __
