The GCC markets have gone through a rollercoaster in 2008, with H1 being positive for the six economies followed by an abysmal second half which saw assets under management (AUM's) of GCC funds contract by a massive 46 percent, the Kuwait Financial Center (Markaz) said recently. The report said there continues to be a cloud of uncertainty over the local, and international, financial landscape, with equity markets trading sideways, liquidity being tight and good news being somewhat scattered, although governments have shown proactive measures aimed at bolstering their economies. However, AUM's continued to decline in the first quarter of the year; the good news is that the shrinkage seems to have steadied somewhat. AUM's for both country specific and pan-GCC funds contracted by 23 percent in the QTD period to $9 billion. The QTD decline was led by Qatar and Kuwait, which saw their AUM's shrink by 29 percent and 34 percent, respectively. Saudi Arabia's AUM contraction has moderated though; declining by 10 percent QTD after plunging 55 percent between April-December 2008, in line with the market stabilizing. Conventional fund AUM's declined by 26 percent in the QTD period while those for Islamic funds declined by 19 percent to $3.59 billion. Most equity funds continued to languish in the red, but there were some gainers in Saudi Arabia and the UAE. Exposure to Saudi Arabia and other MENA region increased at the expense of Qatar and UAE. Allocation to Saudi Arabia increased to 34 percent in March 2009 from 29 percent in April 2008. Exposure to the UAE fell to 15 percent in Mar 2009 from 27 percent in April of last year, signifying lack of confidence in the UAE markets. Fund managers sustained their end of 2008 asset allocation, holding 20 percent in cash while exposure to equities was at 75 percent and bonds held 5 percent of allocation. Saudi Arabia's Tadawul All-Share Index (TASI) was the second best performing GCC market infirst quarter of 2009, declining 2.07 percent. Total volume and value traded in March 2009 stood at approximately 4.89 billion and $23.34 billion, respectively. While the volume traded rose by 12.6 percent during the month, value traded declined by 4.3 percent. Concentration of the top five stocks in terms of volume and value traded to total market capitalization stood at 19 percent. In March, fund managers increased their allocation to cash to 4 percent (on an asset weighted basis) and held 96 percent of assets in equities. AUM's declined by 10 percent to $3.9 billion from $4.35 billion in December 2008. The Kuwait Index continued to decline in 1Q2009 amid continued financial turbulence and poor corporate results. The Price Index closed out the quarter with a loss of 13.87 percent. All sector indices lost in the first quarter, mirroring the general turmoil and economic uncertainty, except the food index, which managed to gain 4.60 percent. The largest declines were in the Insurance and Investment indices, declining 25 percent and 20 percent, respectively. The Kuwait market, dominated by the financial sector, continues to feel the ramifications of the global financial turmoil. Kuwaiti funds have been affected by low investor confidence, high risk aversion, and poor corporate results, all of which has led to sweeping redemption of funds. In the third quarter of 2008, the KSE Price Index lost 17 percent and AUM's contracted by 9 percent to $6 billion. However, the 39 percent plunge in the index in 4Q2008 proved too much for investors to tolerate, as AUM's in Kuwait equity funds shrank by 22.2 percent in the fourth quarter. The continued decline in the Kuwait Stock Price index during the first quarter of the year adversely affected the performance of funds. The Kuwait Stock Price index's closed the quarter with a 13.87 percent decline while the weighted index was down 12 percent; the continued poor market performance has caused increased risk aversion among investors, evident in the 34 percent contraction in AUM's in the first quarter of 2009. Qatar's Doha Securities Market (DSM) plummeted in the first quarter of 2009, falling 29 percent i.e. a worse performance than the 28 percent in 2008 as weak investor sentiment and a selling drive overtook the market. The DSM plunged into the red in January and February, losing 24 percent and 16 percent, respectively, before picking up a gain of 10 percent in March. The Banking & Financials and Insurance sectors lead the index decline, falling 32.38 percent and 32.16 percent, respectively, in 1Q09. AUM's for Qatari equity funds contracted a further 29 percent in the first quarter to $180 million, after shrinking in half between April and December of 2008. The UAE stock markets went in opposite directions in the first quarter of 2009; Dubai (DFM) lost 4.15 percent while Abu Dhabi (ADX) gained 4.10 percent. The DFM's loss was led by the investment and financial Services sector, which lost 14.55 percent, but was countered by gains in transportation and consumer staples, 16.6 percent and 15 percent, respectively. Abu Dhabi's return was led by a 33 percent gain in Telecom, but countered by losses in industrial, real estate, and construction of 16 percent, 30 percent, and 23 percent, respectively. The Muscat Securities Market (MSM), like all the other GCC markets, has been adversely affected by the global financial turmoil, falling 15 percent in the first quarter of the year, largely due to a 12 percent drop in January and a lack of recovery in subsequent months. The services & insurance index has led the market down, declining by 14.6 percent in 1Q09. Assets under management (AUM's) for Omani equity funds contracted by 13 percent to $60 million after plunging 53 percent from April to December 2008. The MSCI Bahrain index lost 26 percent in 1Q09, while the Bahrain Exchange was down 11.5 percent, driven by commercial banks and services which dipped 18 percent and 13 percent for the quarter. However, Bahraini equity funds managed to outperform the benchmark. Bahrain AUM's fell a further 6 percent in the first quarter of the year. __
