May 2009

Oil prices firm up... Inflation back in single digits

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

Kuwait Economic Brief

Economic Brief - May 2009

Oil Market...............................................Page 3 Higher crude prices supported by OPEC cuts, recovery hopes... Kuwait budget likely to see surplus in FY2009/10 Public Finance.......................................Page 5 FY08/09 Spending at 79% of budget, but should be closer to 95% when final numbers are out Inflation..................................................Page 7 December CPI: 9.0% yoy, back in single digits Housing inflation declines from 10.2% yoy to 7.5% Monetary Developments......................Page 8 Credit growth slow despite pickup in real estate loans CBK cuts discount rate 25 bps to 3.5%. Trade......................................................Page 9 Kuwaits trade balance showed a record surplus in 2008 on the back of higher oil exports. Real Estate...........................................Page 10 February Real estate sales remained weak during first quarter of 2009SBC loans firm. Corporate Earnings.............................Page 11 Net loss for 2008. Kuwait Stock Exchange......................Page 15 KSE rallies in April.

Kuwaits crude oil price and production

2.7 2.6
mn barrels/day

140 120 100

dollars per barrel
index

2.5 80 2.4 60 2.3 2.2 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 40 20

Oil Output (left)

Oil Price (right)

monetary indicators
(year-on-year percent growth) 40 35 30 25 20 15 10 Mar 08 Jun 08 Money Supply (M2) Sep 08 Dec 08 Credit Facilities Mar 09

Real estate sales activity

300 250 200
million KD

500 400 300

000 KD / unit

150 200 100 50 0 Mar 08 100 0 Jun 08 Sep 08 Dec 08 Mar 09

Volume of Sales (left)

Average Price (right)

KUWAIT STOCK EXCHANGE

200 19000 16000 13000
million KD

150

100 10000 50 7000 4000 Jul 08 Oct 08 Jan 09 Apr 09 KSE Index (right)

0 Apr 08

Value of Traded Shares (left)

Oil Market & Budget Developments Higher crude prices supported by OPEC cuts, recovery hopes... Kuwait budget likely to see surplus in FY2009/10 After fluctuating at around $40 per barrel (pb) in the first three months of 2009, the price of Kuwait Export Crude (KEC) rose to settle at around the $50 pb mark through April and into May. To some extent, the rise appears to have been driven by the continued implementation of cuts in crude output announced by the OPEC cartel since last September, as the organization seeks to compensate for the steep decline in global oil demand. But the rise has also coincided with the return of a degree of optimism surrounding global economic conditions, including an easing in the rate of decline of some survey-based activity measures, signs of improving health amongst previouslytroubled financial institutions, and a rally in equity markets, all of which suggest that some sort of world economic recovery could soon be underway. In addition to these tentative signals, the nine month-long rally in the US dollar appears to have lost momentum, perhaps reducing pressures on crude prices to fall in order to stabilize prices in foreign currency terms. Benchmark crude prices stabilize around $50 pb, despite storage shortages Other leading benchmark crude prices, such as Brent, also stabilized at close to the $50 pb mark through April, pushing the discount on KEC against this blend close to zero for the first time since 2002. One reason for the narrowing of spreads is the apparent mounting supply glut at key global storage facilities. Although this has been a feature of the market for US West Texas Intermediate (WTI) crude for some time, storage shortages have more recently begun to emerge at Rotterdam in Holland, causing the issue to feature more heavily on European markets. In addition, some analysts point to the continued existence of relatively high crude future prices as encouraging the accumulation of stocks. The price of the December 2010 Brent contract, for example, stood at $66 pb on 1st May, some $14 above the spot price. A year ago, the same contract was trading at a $3 discount to the spot price. IEA sees global recession, cuts 2009 oil demand outlook sharply On the supply side, OPEC continues to implement the
kuwait export crude
(dollars per barrel) 120 110 100 90 80 70 60 50 40 30 20 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10

production cuts that it agreed at the end of last year, which aim to reduce the amount of OPEC-11 crude on the market by 4.2 mbpd from September 2008 levels. Despite the best efforts of key producer Saudi Arabia which has reduced its own output well below its own quota levels and by 1.5 mbpd in March alone overall production remained 700,000 bpd above target in March. While on the face of it the prospect of further cuts seems bullish for crude prices, the tensions implied by the failure of some countries notably Iran, Nigeria and Venezuela to stick to their respective targets could threaten to undermine confidence in OPECs ability to deliver on its promises down the line, thereby making its strategy of stabilizing prices more difficult to implement. Away from OPEC, most analysts (OPEC aside) expect non-OPEC production levels to drop this year. The IEA, for example, expects a fall of 300,000 bpd in non-OPEC output, partly related to the impact of lower oil prices on the viability of non-subsidized biofuels projects. Prices could rise further in 2H09 as market gradually begins to tighten Although underlying oil demand is set to remain weak this year, a seasonal pick-up over the summer months may mean that the recent build-up in global crude inventories could soon pass its peak. The outlook for oil prices could therefore largely depend upon OPECs desire to continue to reign in production even as market conditions tighten. The next clue to this will come at the organizations meeting in Vienna on May 28th, with some analysts highlighting the role that the budgetary positions of OPEC member state governments could play in defining the organizations determination to provide near-term support for oil prices. Given the lack of compliance amongst some OPEC members, the most likely scenario could involve OPEC production continuing to register modest declines perhaps of 100,000 bpd in 2Q09 over 1Q09 levels but for overall output to remain above officially targeted levels. With demand rising slightly in 2H 09 (but down 1mbpd for 2009 as a whole), prices would drift gently upwards through the rest of the year. The price of KEC would rise to $55 by 4Q09 and average $53 for FY2009/10 as a whole.

KEC PRICE SCENARIOS

)dollars per barrel(

Scenario Low Price 2008 1Q09 FY08/09 2Q09f 3Q09f 4Q09f 2009f 1Q10f FY09/10f 90.4 41.4 78.5 45.6 43.8 41.7 43.1 39.1 42.6 Base Case 90.4 41.4 78.5 47.9 50.8 54.6 48.7 58.0 52.8 High Price 90.4 41.4 78.5 47.3 54.7 66.6 52.5 75.6 61.0

Future price projections correspond to NBKs price scenarios.

Economic Brief - May 2009

Steeper-than expected OPEC/non-OPEC supply cuts could spark bigger price rally If, on the other hand OPEC were to decide to take more aggressive action or if non-OPEC supply were to fall by more than expected, perhaps as a result of difficult financing conditions facing commercial oil companies supply could fall by an additional 250,000 bpd, setting the scene for higher prices not just in 2H09 but into 2010, as well. Under this scenario, the price of KEC could be back above $65 pb by the end of this year and above $75 by 1QQ10. Downside risk to prices from weaker than expected demand and OPEC inaction The downside risk to prices stems mostly from the potential for weaker than expected oil demand. If global demand were to fall by the 1.3 1.4 mbpd envisioned by OPEC, the market tightening currently anticipated for 2H09 would be limited. The price of KEC would slip to below $40 by 1Q09 and average $43 in FY2009/10. This scenario assumes that OPEC fails to respond to the weaker demand outlook by invoking deeper cuts in output, although in reality, it would seem likely to do so. Another sizeable budget surplus likely in 2009/10, despite lower oil revenues With FY2008/09 already passed, none of these scenarios will have any bearing on the outcome of last years budget numbers, although the final figures for the year may not yet be known for some time. Budget revenues came in KD 21.2 billion, 67% higher than projected in the governments budget, thanks to oil prices averaging 57% above what the government had forecast, at $79 pb. Officially-reported expenditures for the year are slated at KD 15.0 billion, 79% below budget, but this is likely to be revised up significantly before the closing accounts are approved. Based upon previous years, final expenditure will come in at around 90-95% of budgeted spending, leaving a fiscal surplus for FY2008/09 of KD2.9 to 3.6 billion before payments to the Reserve Fund for Future Generations (RFFG). This figure includes exceptional transfers of KD 5.5 billion to the Public Institution for Social Security.
BUDGET FORECAST
(million KD, unless otherwise noted)

Based on the above price scenarios, FY2009/10 may yet see another healthy surplus. Lower oil revenues are likely to be more than offset by projected cuts in expenditures (over and above the removal of the on-off transfer seen last year). Based upon the governments projected expenditure plans, but assuming that spending eventually comes in 5-10% below the budget numbers, we project that Kuwaits budget balance would come in at between KD-0.9 billion (deficit) and KD+4.8 billion (surplus) next year (before payments of 10% of revenues to the RFFG). This is far better than the governments own projection of a KD4 billion deficit, though still much lower than some of the spectacular surpluses recorded in recent years.

Official Budget Oil Price (USD per barrel) Total Revenues Oil Revenues Non-Oil Revenues Expenditures (official) Surplus (deficit) After RFFG Expenditures (NBK estimate) Surplus (deficit) After RFFG 50.0 12,680 11,650 1,030 18,966 -6,286 -7,554

Under Alternative Oil Price Scenarios FY 2008/09 FY 2009/10 Low Base High Draft Low Base Price Case Price Budget Price Case 78.5 21,147 19,878 1,269 18,966 2,181 67 18,291 2,856 741 78.5 21,157 19,878 1,279 18,966 2,191 76 18,021 3,136 1,020 78.5 21,177 19,878 1,299 18,966 2,211 94 17,617 3,561 1,443 35.0 8,075 6,925 1,150 12,116 -4,041 -4,849 42.6 10,573 9,423 1,150 12,116 -1,543 -2,600 11,510 -937 -1,994 52.8 13,652 12,502 1,150 12,116 1,536 171 11,268 2,384 1,019

High Price 61.0 15,718 14,568 1,150 12,116 3,602 2,030 10,904 4,813 3,242

Public Finance FY08/09 Spending at 79% of budget, but should be closer to 95% when final numbers are out The 12-months follow up statements for the FY08/09 that were recently published reveal a preliminary surplus of KD 6.1 billion- down 47% from FY07/08- before the allocation of 10% of revenues to the Reserve Fund for Future Generations (RFFG). Still reflecting the hike in oil prices for most of the fiscal year, revenues increased 11.6% from an already impressive KD 18.9 billion the previous year. Meanwhile, expenditures doubled from last years figure mainly due to the extraordinary transfer to the Public Institution for Social Security (PIFSS), the cost of fuel incurred by the Ministry of Electricity and Water (MEW) and other transfers. Demand impacting spending strong last three years Demand impacting expenditures, those items with a more direct effect on the economy, saw a smaller but still significant increase of 17%. Spending averaged 93% of budget last four years It is very important to note here that, even with 12 months of data, these numbers are not the official closing numbers for the fiscal year. The latter are due later and typically, the Ministry of Finance tends to underestimate expenditure figures in the preliminary statements, and the closing accounts are usually adjusted significantly upward. Furthermore the year-on-year comparisons may be altered when we do get the officials closing figures. For now, March data (12 months) reveal that total spending stands at only 79% of budget. However the past four years closing accounts show final spending at 93% of budget plans, on average. Therefore; total spending in
REVENUES AND EXPENDITURES - FISCAL YEAR 2008/09
(million KD)

FY08/09 is likely to see an estimated upward adjustment of 10-20%. When the final numbers are out, we expect a budget surplus of KD 3.0-4.0 billion. Even with the recent drop in oil prices, Kuwait Export Crude still averaged $79.7 per barrel during FY08/09, 6% higher than the previous fiscal year. Boosted by high oil prices for most of the fiscal year, Kuwait posted KD 19.9 billion in oil revenues, 71% higher than budgeted and more than 12% above last years figure. However, with the start of the new fiscal year and the drop in oil prices, we should see oil revenues at much more modest levels.
KUWAIT BUDGET
(%) Change 2009/10 -36.3% -40.6% 12.1% -36.1% 8.3% -23.5% 92.2% -24.0% -56.8% -10.7% Ex-PIFSS (%) Change 2009/10

Budget 2008/09 Revenues Oil Non-oil 12,679 11,653 1,026

Budget 2009/10 8,075 6,925 1,150 12,116 3,476 2,354 344 1,265 4,681 -4,041 808 -4.849 35 54

Expenditures 18,966 1. Wages & Salaries 3,210 2. Goods & Service 3,077 3. Transportation & Equipment 179 4. Projects & Maintenance 1,665 5. Miscellaneous & Transfers 10,836 Surplus/Deficit - before RFFG -6,287 Suplemetary appropriations (not inlcuded above) Allocation to RFFG 1,268 Surplus/Deficit - after RFFG Assumed oil price (KEC) Breakeven oil price (KEC) -7.555 50 75

Source: Ministry of Finance *Note: Ex PIFSS shows the change in budget allocations excluding extra-ordinary transfers to PIFSS

12 Months Interim Report FY07/08 FY08/09 Total Revenues Oil Revenues Non-Oil Revenues Total Expenditures Excluding Transfer to PIFSS Wages and Salaries Goods and Services Vehicles and Equipment Projects, Maintenance and Land Purchases of which: Electricity and Water Public Works Misc. Exp. and Transfers Miscellaneous Expenditures of which: Min. of Defense* Military Procurement Transfers to Public Institutions of which: Social Security (PIFSS) Surplus (deficit) After RFFG * including military salaries. 18,934 17,719 1,215 7,493 6,852 1,950 1,524 51 718 388 193 3,250 959 641 112 1,242 641 11,441 9,548 21,133 19,878 1,254 15,040 8,765 2,131 2,415 62 945 591 193 9,488 1,041 728 37 7,175 6,276 6,092 3,979

Change (mn KD) 2,199 2,159 40 7,547 1,913 181 892 10 227 202 0 6,238 82 87 -74 5,933 5,634 -5,349 -5,569

(%) 12 12 3 101 28 9 59 20 32 52 0 192 9 14 -67 478 879 -47 -58

Actual / Budget (%) FY07/08 FY08/09 228 238 140 66 65 74 83 24 35 35 54 71 72 67 81 69 94 167 171 122 79 69 66 78 34 57 85 50 88 77 78 51 95 99

Economic Brief - May 2009

Non-oil revenues saw a more subdued increase of 3% this year than last years remarkable 28%. Most of this increase came from miscellaneous revenues and fees, which were up by almost KD 40 million (11%). Service charges rose 3% to reach KD 492 million driven by healthcare receipts. Income tax revenues rose 16% and compare poorly to an average rise of 40% in the previous four years. This is mainly due to weaker business activity and subsequent poor corporate profitability. The slump in real estate reflected on property fees and land sales which dropped 50% and 84% respectively. Custom fees also dropped more than 34% driven by weaker trade, not to mention reduced or cancelled duties on some food and construction items earlier in 2008. On the expenditures side, those doubled from FY07/08 but remained at 79% of budget. Based on previous years, we expect spending to be later adjusted up to reach 93% of budget, if history is any guide. (table below) Wages and Salaries rose by 9.3% compared to a projected 8.3% in the new budget for FY09/10. Spending on this chapter remains 34% behind budget mainly due to delayed reporting and should be adjusted up in the closing accounts. Higher 2008 oil prices and the cost of fuel incurred (especially by MEW) remain behind the 59% jump in Goods and Services. With oil prices falling, the FY09/10 budget reveals a cut of 24% in this chapter. The significant increase of 192% in Chapter 5 Transfers and Miscellaneous Expenditures in FY08/09 is clearly due to the extraordinary transfer to (PIFSS). With the absence of such a transfer in the current fiscal year, this chapter should drop 56%. Spending on so-called chapter 4, Projects, Maintenance and Land Purchases, rose by 32% from FY07/08 driven mainly by spending on (MEW)s big power and water projects. Though showing progress, at 57%, actual spending on this chapter remains well behind budget. Even with the upward adjustments made in the closing statements, the actual spending to budget rate in this chapter averaged 75% in the past four years. Therefore; we expect FY08/09 to close with a total spending of KD 1.2 billion on Projects, Maintenance and Land Purchases.

FY09/10 budget plan allocates KD 1.3 billion for spending on chapter 4. Even if the current year closes at 100% of budget, which is very unlikely, spending on Projects, Maintenance and Land Purchases would see little, if any, growth. Chapter 4 crucial but still awaiting closing accounts Spending on projects (chapter 4) has always been a main driver of non-oil sector growth. It is therefore crucial to boost that category in difficult economic times, it tends to help the economy a year later. Given the modestto-no-increase expected in actual (versus budgeted) Ch 4 projects spending in 2009, there is reason to be concerned about the economy in 2010, especially if no changes are made to the current budget law in the aftermath of May elections. Recall the tentative nature of the data prior to closing numbers and that the slated 24% cut in the 09/10 budget will likely be very different from actual spending on the ground.

SPENDING RATE
Closing / 12 Months/Budget Average (04-08) Expenditures Wages & Salaries Goods & Services Transportation & Equipment Projects, Maintenance & Land Purch. Miscellaneous & Transfers 73% 76% 74% 30% 40% 81% FY08/09 79% 66% 78% 34% 57% 88% Budget Average (04-08) 93% 98% 96% 60% 75% 97%

DEMAND - IMPACTING EXPENDITURE, 12 MONTHS INTO FY

KD mn 1000 800 600 400 200 0
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

non-oil gdp & ch4 spending (yoy%)

60 40 20

% 30 25 20 15 10 5 0

15 20 0 -20 5 -40 -60 2000 2002 2004 2006 2008e 2010e 0 10

Capital Expenditure (LHS)

% Demand-impacting Expenditure (yoy%, RHS)

Ch4 Lagged-1-Year (LHS)

Non-Oil GDP (RHS)

Inflation December CPI: 9.0% yoy, back in single digits Housing inflation declines from 10.2% yoy to 7.5% In December 2008, year-on-year (yoy) inflation finally returned to single digits at 9.0%, from 10.4% in November. CPI Inflation has been declining for some time and should settle soon around 6% which we believe is the current underlying pace (chart 1). The broad price categories have fallen to single-digit inflation, one after the other, with the latest one: housing costs. The latter fell from a high of 16.1% earlier in the year, was 10.2% in November, and finally fell to 7.5% in December 2008, in line with a cooler real estate and rental market. The only two broad categories still above 10% are food and household goods and services. Food price inflation fell from 12% in November to 11% yoy in December, a bit more stubborn than other categories. The 1.4% month-on-month jump in December may be partly due to Eid-al-Adha and end-of-year effects. We estimate that, typically, December/year-end adds 1% to the monthly numbers (which are not seasonally adjusted). The trend of food inflation, like elsewhere however, is down and should benefit further from lower commodity prices world wide. The other big December jump was in household goods and services up 2% mom, and 18.3% yoy. We cannot blame that increase on year-end effect. That category saw the highest inflation last year and will be the last to get back into single digits. The category carries a 14.7% weight in CPI and was the most impacted by inflation last year, with furniture prices leading the charge (up 52% yoy in November). There are many imports in that category and their prices have yet to ease because of the strong dinar (in 2008) and because of slower economic conditions. With Decembers data in, 2008 inflation averaged 10.6% for the year, compared to 5.5% in 2007. The well know story is, however, that after rising in 2007 and in the first half of 2008, inflation in Kuwait peaked at a record high in August 2008 (11.6% yoy) and then started slowing in the second half of the year. The slowdown should continue into this year and we expect 2009 inflation to average close to 6% for the year.

CONSUMER PRICE INDEX

CPI (Basis 2000) `Dec 08 Overall Index Food Beverages and Tobacco Clothing and Footware Housing Services** Household Goods and Services Transport and Comm. Education and Medical Care Other Goods and Services ** updated every 3 months only 135.3 150.9 154.4 142.8 136.5 129.3 114.7 149.9 130.5 %yoy Dec 08 9.0 11.0 17.8 7.5 7.5 18.3 2.0 6.8 9.1 %mom Dec 08 Nov 08 Oct 08 1.0 1.4 -2.1 0.2 1.9 2.0 -1.4 0.3 0.2 0.1 0.4 -0.9 0.6 0.0 0.0 0.2 0.1 0.3 0.4 0.2 0.0 1.7 0.1 0.6 0.3 0.1 0.3

KUWAIT CPI INFLATION

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08

kuwait cpi inflation : Food & housing (yoy % ch)

18% 16% 14% 12% 10% 8% 6% 4% 2% Apr 07 Jun 07 Aug 07 Oct 07 Dec 07 Feb 08 Apr 08 Jun 08 Aug 08 Oct 08 Dec 08
Housing (27% of CPI) Food (18% of CPI)

CPI % CH. YOY

CPI % CH. LAST 3-MOS ANNUALIZED

Economic Brief - May 2009

Monetary Developments Credit growth slow despite pickup in real estate loans CBK cuts discount rate 25 bps to 3.5% Marchs monetary developments followed along the lines of February. Private deposits at local banks continue to expand rapidly thanks to government injections, through semi-public institutions. These institutions (such as PIFSS, KPC, etc.) have their accounts classified as private deposits according to the Central Bank of Kuwait (CBK). This effort by the government is aimed at replacing liquidity lost when foreign deposits exited the system back in the second half of 2008. As a result of these rising institutional deposits, money supply (M2) shot up 3.4% (m-o-m) in March. Meanwhile, credit growth remained sluggish despite a pick-up in the real estate sector in the previous two months. On the 14th of April, the CBK cut its discount rate by 25 bps to 3.5%, its lowest level since mid 2004. With this measure, the CBK hopes to stimulate credit growth. Slow credit expansion Credit to residents rose 0.8% (+KD 185 million) in March, coming well below its pace of recent years and pushing y-o-y growth down to a four-year low. Uncertainty and lower confidence are keeping credit demand and growth in check. For the second straight month, loans to the real estate sector remained the largest and rare growth sector, rising KD 204 mn in March. Real estate data showed a surge in sales of residential and commercial properties in February which might have carried over to March. Industrial and consumer loans (excluding securities financing) were the only other two sectors growing in March. Private deposits buoyed by semi-government institutions Private resident deposits rose KD 838 million in March, mainly on increased deposits from semi-government institutions. Otherwise, cash dividend payments by four banks in March, totaling KD 185 million, also helped raise deposits. Meanwhile, deposits of non-residents dropped KD 223 million, part of the crisis-driven withdrawals by foreigner accounts. During the first quarter, deposits of
MONETARY HIGHLIGHTS - MARCH 2009
Mar 2009 mn KD Local Bank Assets of which: Claims on Government Credit to Residents Foreign Assets Money Supply (M2) Private Deposits Sight Deposits Savings Deposits KD Time Deposits & CDs FC Deposits 39,583 1,795 24,178 8,417 24,862 24,120 3,953 2,665 14,421 3,082 mom % 0.5 -10.8 0.8 1.4 3.4 3.6 -3.5 -2.2 3.4 22.7 Change 3-mnth % 0.9 -9.6 2.2 -4.3 13.3 13.5 7.9 7.1 9.3 62.3 yoy % 6.3 0.1 13.2 13.1 21.9 22.3 -5.7 3.3 27.2 90.7

residents grew KD 2.9 bn compared with a KD 1.1 bn drop from non-residents. System foreign assets drop CBKs foreign assets dropped KD 146 million in March, their first drop in seven months. Meanwhile, local banks net foreign assets rose KD 434 million, following a large drop in foreign liabilities (both bank and non-bank deposits). KIBOR continues to fall Banks holdings of public debt instruments dropped KD 217 million in March as most of the KD 399 million renewed treasury bonds were subscribed by non-banks. Liquid assets at local banks (incl. local net interbank deposits) dropped KD 46 million in March. Despite this drop, banks remain amply liquid. The December cut in CBK reserves to deposits ratio to 18% from 20% and the gush of new deposits to banks has greatly lowered pressure on banks liquidity. Accordingly, average KIBOR fell between 43 and 67 bps over the different maturities in March. Relative calm in the currency market since midMarch At the end of March through mid-April, the dinar traded within a relatively narrow band compared to previous months, mimicking the stability witnessed in international currency markets.

exchange rates
0.31 0.30 0.29 0.28 0.27 0.26
May 07 Apr 08 Aug 07 Dec 07 Aug 08 Dec 08 Apr 09
Mar-09

0.43 0.41 0.39 0.37 0.35 0.33

Dollar/Dinar (LHS)

Euro/Dinar (RHS)

monetary indicators
(year-on-year percent growth)

40

30

20

10

0 Mar-07 Sep-07 Mar-08 Sep-08

Money Supply (M2) KD Resident Deposits Credit Facilities

Trade Kuwaits trade balance showed a record surplus in 2008 on the back of higher oil exports According to data released recently by the Central Bank of Kuwait (CBK), Kuwaits trade surplus rose to KD 16.7 billion in 2008, up 39% from the previous year, on the back of strong growth in oil exports. Most of the gains in the trade surplus was achieved during the first three quarters of the year when oil prices were at their record high. Oil exports, however, dropped by 41% in the last quarter of 2008 year on year, reflecting the sharp drop in oil prices. Oil exports, which account for the bulk of total exports, rose by 64% during the first nine months of 2008 compared with the same period a year ago, but dropped by 41% in the last quarter of the year on annual basis. Overall, oil exports in 2008 were 32% up from the previous year, affected mainly by the 38% rise in the price of Kuwait export crude (KEC). KEC went from an average of $66 per barrel in 2007 to $91 per barrel in 2008. Production rose 3.8% to 2.55 million barrel per day in 2008. Oil exports, however, are set to face a difficult year in 2009 with the current lower oil prices, and the cut in oil production. The drop in oil exports will negatively impact governments revenues in the current fiscal year, compared to last year. Non-oil exports continued their strong growth, rising by 18% in 2008 to reach KD 1.16 billion, or 5% of total exports. 41% of the expansion in non-oil exports came from exports of ethylene products, 31% from the rise in re-exports, and 10% from the exports of manufactured fertilizers. Meanwhile, imports grew by 16% from the previous year to reach KD 6.7 billion, or 29% of total exports. Imports growth has been strong in recent years, reflecting the strong expansion in economic activity and domestic demand until the last quarter of 2008.

FOREIGN TRADE
(KD million)

NON-OIL EXPORTS
(KD million)

Oil Year 2002 2003 2004 2005 2006 2007 2008 Exports 4272.8 5663.5 7861.1 12392.6 15429.7 16780.0 22200.1

Non-Oil Exports 393.4 498.5 567.0 709.0 823.2 981.9 1162.3

Total Exports 4666.2 6162.0 8428.1 13101.6 16252.9 17761.9 23362.4 Imports 2735.8 3274.1 3722.2 4613.9 5000.5 5778.9 6688.3

Balance of Trade 1930.5 2888.0 4705.8 8487.7 11252.4 11983.0 16674.1 Year 2002 2003 2004 2005 2006 2007 2008

Manufactured Fertilizer 15.5 31.6 41.1 56.0 63.5 76.0 94.0

Ethylene Products 191.0 188.4 229.0 311.0 348.0 400.0 473.6 Other 121.2 153.3 156.9 162.0 143.8 160.0 192.8

ReExports 65.7 125.2 140.0 180.0 267.9 345.9 401.9 Total 393.4 498.5 567.0 709.0 823.2 981.9 1162.3

Economic Brief - May 2009

Real Estate Real estate sales remained weak during first quarter of 2009SBC loans firm Real estate sales remained weak in March, following a notable jump in February. A total of 386 sales transactions were registered in March, at a value of KD 89.4 million. Sales volumes fell by 11.6%, while number of transactions rose by 18.4% from the previous month. However, sales volume and number of transactions figures were 67.8% and 55.8% down yoy, respectively. The drop in March came largely from a decrease in activity in the commercial property sector with sales falling 56.7% (mom). The monthly decline was from a high level in February when a couple of large transactions took place.. Most of the activity in the real estate market continued to come from residential property sales. Number of transactions in residential plots and homes represented the bulk of real estate sales with 67% of total transactions in 1Q09. The residential property sector represented 48%
sales activity, residential sector
200 180 160 140 120 250 200 300

of total sales volume (KD) of real estate. The number of transactions for residential plots in Khairan Pearls and Abu Futaira areas accounted for more than half of all residential plots in 1Q09. In the first quarter as a whole both sales volume (KD) and the number of transactions fell, by 21.7% and 20.6% respectively, compared with 4Q08. 1Q09 activity was also lower than in 1Q08, having fallen by 57% in both sales volume (KD) and number of transactions. However, sales volume for the commercial sector was more brisk rising by 35% in 1Q09 compared to 4Q08 (perhaps helped by one-time large transactions in February). Meanwhile, March saw a drop in average prices, were 9% lower in apartments properties and fell by 2.6% for residential properties.

sales activity, apartments sector

200 180 160 140 1,600 1,400 1,200

000 KD / unit

120

million KD

million KD

100 80 60 40 20 0 Mar 06 Dec 06 Sales Volume (left) Sep 07 Jun 08

150 100 50 0 Mar 09 Average Transaction size

100 80 60 40 20 0 Mar 06 Dec 06 Sales Volume (left) Sep 07 Jun 08

800 600 400 200 0 Mar 09

Average Transaction Size

REAL ESTATE SALES & SCB HOUSING LOANS

Real Estate Sales Sales Volume (mn KD) Residential Property Apartments Commercial Number of Transactions Residential Property Apartments Commercial Average Transaction Size (000 KD) Residential Property Apartments Commercial Monthly Avg. 2007 2008 233.5 128.6 83.6 21.3 773.6 648.3 117.3 8.0 301.7 201.6 703.8 2,360 156.2 74.8 56.7 24.7 513.8 381.4 121.3 11.1 320.3 203.3 477.2 2,563 Oct 2008 94.5 32.1 40.1 22.3 290 157 119 14 326 204 337 1,596 Oct 2008 502 296 79 127 21.9 17.2 3.3 1.4 12.4 7.4 3.5 1.5 Nov 2008 136.6 64.0 66.0 6.6 515 341 171 3 265 188 386 2,200 Nov 2008 404 211 94 99 18.3 13.1 4.0 1.1 13.0 7.7 3.7 1.6 Dec 2008 112.2 70.8 24.9 16.5 460 334 111 15 244 212 225 1,100 Dec 2008 346 164 49 133 14.0 10.2 2.4 1.4 9.8 6.2 2.5 1.2 Jan 2009 78.7 34.6 32.7 11.4 293 179 108 6 268 193 303 1,893 Jan 2009 507 277 72 158 23.5 18.4 3.5 1.6 12.9 8.0 3.3 1.6 Feb 2009 101.2 45.8 20.5 34.9 326 237 85 4 310 193 241 8,720 Feb 2009 420 236 40 144 19.3 15.8 1.9 1.5 11.7 7.6 2.6 1.5 Mar 2009 89.4 48.2 26.1 15.1 386 256 119 11 232 188 219 1,373 Mar 2009 451 248 49 154 19.8 16.4 2.0 1.5 14.3 9.6 2.8 1.9

SCB Housing Loans Number of Approved Loans New Construction Purchase of Existing Homes Additions & Renovations Volume of Approved Loans (mn KD) New Construction Purchase of Existing Homes Additions & Renovations Volume of Disbursed Loans (mn KD) New Construction Purchase of Existing Homes Additions & Renovations

Monthly Avg. 2007 2008 378 146 118 114 12.5 5.7 5.3 1.5 15.1 8.3 5.2 1.7 412 195 89 128 15.0 10.2 3.2 1.5 12.1 7.0 3.7 1.5

10

000 KD / unit

1,000

Corporate Earnings The value of loans approved by the Savings and Credit Bank (SCB) grew moderately in March, up 7.4% in number and 3% in value. The number of loans approved for the construction of new homes rose by 23% m-o-m, this increase is consistent with the rise in permits issued for the construction of new homes. During March, permits issued for construction of new homes rose by 55.7% compared to previous month. SCB approved 451 loans in March, compared to a monthly average of 412 in 2008. Meanwhile, the value of loans disbursed in March rose by a faster 23% from the previous month to KD 14.3 million, the highest since November 2007. However, loan approvals for 1Q09 as a whole were up 10% and 15.5% in number and value, respectively, compared with 4Q08. Loans from the SCB are up in recent months and are showing more life than the rest of the real estate sector, probably thanks to the distribution of plots of land in mid 2008.
sales activity, commercial sector
120 100 80 10,000

Real Net loss for 2008 Kuwaiti firms listed on the Kuwait Stock exchange suffered a loss of KD 40 million in 2008 due to the global economic meltdown. Fourth quarter losses, led by the financial sector, more than offset any gains in the previous three quarters. Only 28 companies reported a profit. Corporate earnings in 2008 have fallen off a cliff, in no small part due to the contribution of non operating earnings to total earnings of Kuwaiti companies. The sectors with the most exposure were investment and industrial due to large equity portfolios which incurred heavy losses. In particular, some of the more leveraged companies were hammered severely as they scrambled to raise capital and avert bankruptcy. The investment and industrial sectors suffered losses of KD 840 million and KD 376 million respectively in 2008. National Industries and Global Investment House account for a large share of these losses. Investment company losses are expected to be revised downward due to a delay in reporting by Dar Investment. The services sector was the most resilient in 2008. Even though profits shrunk by 37% to KD 490M in 2008, the sector now accounts for the largest share of profits on the KSE, boosted primarily by Zains earnings. Meanwhile, the banking sectors cautious approach as well as declines in asset prices or collateral values prompted them to increase reserve provisions in Q4 08. Gulf banks KD 376M loss on a derivative position also depressed banks earnings in 08.
CORPORATE Earnings history & growth
(Growth shows change in same-company pro ts for those reporting this period) 6

8,000

million KD

6,000 60 40 20 0 Mar-06 Dec-06 Sales Volume (left) Sep-07 Jun-08 4,000

2,000

0 Mar-09

Average Transaction Size

approved and disbursed loans by s&cb

120 100 80 60 40 20 0 -20 -40 -60 Mar 07 Sep 07 Mar 08 Sep 08 Mar 09 30 20 10 0 - 10 - 20 - 30 - 40

000 KD / unit

5 4

71% 97% -25%

million KD

3 2 1 0 -1 2005

-101%
2006 2007 2008

yoy % change in number of approved loans (left) yoy % change in disbursed loans (right)

Net Pro ts

Growth

SECTOR PERFORMANCE
(million KD) Net Profits 2008 Banking Investment Insurance Real Estate Industrial Services Food Non-Kuwaiti Companies Total Market Kuwaiti Companies 310 -840 2 -36 -376 490 31 377 -41 -418 2007 1,035 1,319 86 363 446 781 79 486 4,595 4,109 Growth % 2008 -70 ... -98 ... ... -37 -60 -22 ... ...

COMPANY PROFITS - 2008

Highest Earnings 1. Zain Kuwait 2. National Bank of Kuwait 3. Kuwait Finance House 4. Agility 5. Commercial Bank Lowest Earnings 1. Gulf Bank 2. National Industries 3. Global Investment House 4. Noor Financial Investment 5. Al Safwa Group million KD 322.0 255.3 157.0 141.4 100.7 million KD -359.5 -282.0 -257.6 -129.1 -70.0

11

Economic Brief - May 2009

CORPORATE EARNINGS - 2009

(thousand KD)

Code Banking 101 102 103 104 105 106 107 108 109 Investment 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 Insurance 301 302 303 304 305 306 307 Real Estate 401 402 403 404 405 406

Company Name

Full Year 2008 255,349 -359,516 100,730 46,036 51,365 19,800 37,781 156,960 1,846 -42,089 15,247 -65,123 -20,733 24,125 -47,921 -28,935 -25,612 -15,600 -18,784 3,934 -21,489 -6,320 3,226 -8,266 1,821 60 11,187 -257,649 -51,803 -25,277 1,110 -15,435 -7,470 489 -12,077 -58,049 -24,867 -604 -274 -6,638 -14,939 1,205 -129,066 1,818 926 -11,198 -1,400 2,946 3,607 -3,816 2,424 -1,116 263 -2,639 -46,844 6,114 18,292 -35,495 13,593

2007 273,572 130,437 120,356 76,041 48,179 17,982 74,818 275,266 18,562 44,875 36,480 80,803 58,473 521,692 36,414 25,880 11,649 27,321 11,131 34,899 8,999 27,017 13,262 21,165 61,172 126,000 9,001 25,375 4,840 14,643 24,614 7,527 91,365 7,886 15,123 21,789 37,122 19,993 13,081 8,394 8,645 9,041 22,074 24,791 483 9,180 1,117 6,152 20,964 45,350 8,712 1,065 13,293 37,666 16,322 8,335 7,667 1,911 571 30,253 10,215 39,021 30,977 4,271 11,562

Growth % -7 -16 -39 7 10 -50 -43 -90 -58 -95 -70 -87 -88 -100 49 -97 -94 -94 -79 -13 -78 -90 -71 -86 -40 -53 18

Fourth Quarter 2008 2007 11,657 -445,471 -4,203 -24,358 966 -13,879 -28,466 -63,626 -17,319 -54,523 -2,151 -74,523 -63,160 -59,436 -71,504 -18,345 -34,032 -17,963 -17,811 -4,829 -30,681 -14,190 -15,119 -5,423 -6,850 -26,467 -15,045 -360,549 -57,575 -32,605 -19,543 -23,107 -10,873 -4,556 -12,245 -43,336 -50,624 -786 -16,177 -11,558 -19,478 -13,022 -142,089 -2,277 213 -11,999 -1,679 -5,291 -7,230 -18,307 307 -2,169 -1,125 -1,950 -55,429 -1,255 -2,250 -22,631 -21,834 53,104 25,350 28,173 6,005 9,231 9,428 14,243 98,395 4,846 7,239 7,460 31,821 11,635 69,564 26,074 -2,861 -4,247 -339 2,225 9,516 -2,251 2,348 4,151 4,520 28,687 3,901 951 4,068 -209 3,595 8,994 -6,034 29,474 760 4,441 -1,046 5,075 4,205 -2,162 -150 3,148 2,050 -77 9,779 19 3,069 685 591 3,502 1,003 3,457 318 439 2,253 3,816 573 2,411 997 308 7,070 3,530 5,514 17,152 -2,619 3,102

Growth % -78 -90 -33 -46

National Bank of Kuwait Gulf Bank Commercial Bank Al-Ahli Bank Bank of Kuwait & Middle East Kuwait International Bank Burgan Bank Kuwait Finance House Boubyan Bank Kuwait Investment Co. Commercial Facilities International Financial Advisors National Investments Kuwait Investment Projects Al-Ahlia Investment Coast Investment & Development The International Investor Securities House Industrial & Financial Investments Securities Group International Finance Co. Kuwait Financial Centre KMEFIC International Investment Group Aref Investment Group Al-Dar Investment Al-Aman Investment First Investment Co. Al-Mal Investment Gulf Investment House A'ayan Leasing & Investment Co. Bayan Investment Co. Global Investment House Osoul Leasing & Investment Co. GulfInvest Kuwait Finance & Investments Co. KIPCO Asset Management Co. International Leasing & Investment Co. Kuwait Invest Co. (Holding) National International Co. (Holding) Housing Finance Al Madar Finance & Investment Al-Deera Holding Co. Al Safat Investment Burgan Group Holding EKTTITAB Holding Company Iraq Holding Sokouk Holding Al Madina for Finance & Investment Noor Financial Investment Al Tamdeen Investment Kuwait Bahrain International Exchange DAMAC Kuwaiti Holding KUWAIT SYRIAN HOLDING Kuwait Insurance Gulf Insurance Al-Ahlia Insurance Warba Insurance Kuwait Re-Insurance First Takaful Insurance Wethaq Takaful Insurance Co. Kuwait Real Estate United Real Estate National Real Estate Salhia Real Estate Pearl of Kuwait Real Estate Al-Tamdeen Real Estate

12

CORPORATE EARNINGS - 2009

(thousand KD)

Code

Company Name

Full Year 2008 -3,968 36 -2,486 6,763 6,225 15,326 -20,738 -18,576 573 14,465 115 6,878 -1,180 -1,429 13,046 -27,072 -3,159 -5,139 2,936 9,760 5,957 9,675 620 -281,963 -44,523 4,312 218 3,237 684 861 -8,625 203 -5,108 -3,850 6,531 -11,230 1,888 684 2,596 1,444 245 -9,315 3,034 -9,303 26,502 -160 577 -5,623 -49,210 4,707 1,083 141,373 7,442 322,002 1,515 4,074 5,600 -1,690 -5,426 -4,333 2,928

2007 21,139 6,655 3,070 5,655 4,267 10,131 21,751 16,504 14,000 13,506 2,233 44,650 1,435 6,169 1,735 2,236 24,571 1,398 20,278 20,756 5,706 649 3,531 817 9,140 16,840 27,217 4,525 209,364 14,409 54,824 1,070 26,912 4,842 4,062 10,828 524 1,427 9,299 22,080 27,937 52,630 1,118 6,636 3,749 2,046 849 12,577 2,048 212 57 2,388 702 14,802 1,465 11,615 9,081 1,913 153,941 13,807 320,455 362 6,458 6,725 532 16,891 1,694 3,556

Growth % -99 -33 -71 -7 -74 -68 -92 11 -47 -17 7 -65 -64 -86 -92 -80 -88 -86 -79 -61 -70 69 -90 -31 -29 -71 48 46,537 -18 -48 -43 -8 -46 0 318 -37 -17 -18

Fourth Quarter 2008 2007 -5,834 2,067 -3,881 -9,148 850 -18,698 -5,500 -13,285 -1,910 210 -1,439 -4,712 -39,988 -22,855 -7,161 -4,346 2,545 -18,368 4,091 -33,914 -383,775 -33,959 -15,844 -287 -20,297 1,376 -1,193 -5,082 -1,168 -6,735 -5,476 -1,720 -12,991 669 -576 -216 173 -271 -16,406 -215 -10,678 12,176 -233 81 -9,258 -54,352 -5,866 40 33,566 -11,161 86,838 -4,635 2,992 969 -2,952 -17,007 -4,466 470 -3,743 7 146 589 270 2,667 5,176 2,799 -1,802 -134 -1,056 17,215 222 2,703 566 -907 3,296 460 10,954 3,702 1,589 -226 685 98 3,287 4,349 1,403 -3,430 4,879 174 4,078 -226 49 -2,708 285 54 2,837 15,188 -701 14,076 -97 204 759 514 122 3,430 728 906 -18 -39 129 3,066 173 308 34,693 3,319 85,369 4,602 2,145 259 -1,336 -422 943

Growth % 251 -70 -92 -23 -66 -37 -87 -3 2 -35 -55 -50

407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 Industrial 501 502 503 504 505 506 507 508 509 510 511 512 513 514 515 516 517 518 519 520 521 522 523 524 525 526 527 528 Services 601 602 603 604 605 606 607 608 609 610 611 612

International Investment Projects Ajyal Real Estate Entertainment Co. Al-Massaleh Real Estate Co. Arab Real Estate Union Real Estate Enma'a Real Estate Mabanee Co. Injazzat Real Estate Development Jeezan Holding Kuwait Lebanese Real Estate Deve. Co. International Resorts Co. Commercial Real Estate Co. Sanam Real Estate Co. A'ayan Real Estate Co. Aqar Real Estate Kuwait Real Estate Holding Al Mazaya Holding Al Dar National Real Estate Al-Themar International Holding Grand Real Estate Projects Tijara & Real Estate Investment Tameer Real Estate Investment Arkan Al-Kuwait Real Estate Gulf Horizon Holding Al-Argan International Real Estate Abyarr Real Estate Development Co. Munshaat Real Estate Projects Co. First Dubai For Real Estate Development National Industries Kwt Pipes Industries & Oil Services Kuwait Cement Refrigeration Industries Gulf Cable & Electrical Industries Heavy Engineering Ind. & Shipbuilding Contracting & Marine Services Kuwait Portland Cemen t Shuaiba Paper Products Metal & Recycling Kuwait Foundry Aerated Concrete Industries United Industries Boubyan Petrochemical Co. Gulf Glass Manufacturing Al-Hilal Cement Al Kout Industrial Projects Co. Kuwait Packaging Materials Manufac. Kuwait Building Materials Manufac. National Industries Co. for Bldg. Gulf Rocks Co. Equipment Holding Global Holding Group National Co. for Consumer Industries Kuwait Gypsum Manuf. & Trading Qurain Petrochemical Industries Salbookh Trading Co. IKARUS Petroleum Industries Kuwait Cinema Kuwait Hotels Agility Kuwait Commercial Markets Complex Zain Kuwait Hasibat Holding Co. Educational Holding Group Independent Petroleum Group National Cleaning Co. The Sultan Center Al-Arabi Holding The Transport Group

13

Economic Brief - May 2009

CORPORATE EARNINGS - 2009

(thousand KD)

Code

Company Name

Full Year 2008 82,429 -7,986 -3,622 -511 193 1,761 145 1,187 1,722 -69,952 342 -13,737 0 -3,499 1,893 -5,402 -5,005 -1,115 -27,062 37,464 8,496 309 -8,052 1,749 2,725 10,055 -19,910 3,195 3,276 2,472 3,400 481 4,918 779 4,448 3,361 -2,618 -5,219 -1,718 35,223 486 5,107 21,478 169 689 14,514 -6,055 -8,162 59,200 16,787 2,708 80,677 68,603 26,254 73,064 20,934 6,334

2007 80,749 10,722 1,466 2,989 1,547 1,507 320 2,373 644 20,296 4,601 8,583 758 3 1,038 1,666 6,528 1,221 1,333 9,003 9,509 22,821 8,693 4,563 1,102 3,008 -13,793 8,220 2,927 9,130 1,097 7,853 4,040 723 2,936 1,177 685 558 4,894 4,441 2,277 2,288 3,119 3,296 14,649 -1,433 54,964 1,402 5,828 30,954 31,225 8,073 12,778 11,878 6,571 60,300 16,153 2,935 93,449 64,375 12,339 82,376 23,218 29,359

Growth % 2 -88 17 -55 -50 167 -93 -92 14 64 -2 -72 -79 -7 10 -21 12 261 509 -90 11 -66 94 8 -36 -65 -12 -31 -99 -91 14 -2 4 -8 -14 7 113 -11 -10 -78

Fourth Quarter 2008 2007 14,250 -9,104 -2,630 -1,401 -736 -420 -156 -480 -92,982 708 -21,039 -149 -10,135 695 -10,443 -7,261 -1,838 -50,141 1,807 -261 -11,645 -2,148 -17,090 -770 914 1,742 90 -2,650 2,733 -1,211 2,967 1,062 631 -10,228 298 -2,745 -14 1,949 4,200 -14,566 -5,812 5,102 -10,046 -5,269 -33,744 -5,717 133 -230 6,001 7,405 -1,911 6,598 21,388 2,562 -242 -42 505 -33 -143 255 765 4,648 -1,351 474 -171 440 422 2,890 335 -116 2,634 2,704 1,974 982 517 303 -9,911 451 -345 3,524 244 -609 1,029 393 976 129 403 96 2,432 1,914 -618 -103 -1,355 11,159 181 5,381 12,499 5,412 915 2,562 2,031 3,669 4,340 -3,281 291 28,860 19,055 1,832 17,685 4,177

Growth % -33 -85 65 -8 -6 332 -7 43 -64 -66 99 -54 -69 304 58

613 Wataniya 614 Kuwait & Gulf Link Transport Co. 615 Kuwait Cable Vision 616 Automated Systems Co. 617 National Petroleum Services Co. 618 Kuwait Co. For Process Plant Cons.& Cont. 619 Kuwait Slaughter House 620 EYAS for Higher & Technical Education 621 Nibras Holding Co 622 Al Safwa Group 623 Human Soft Holding 624 Kuwait Privatization Project Holding 625 Institute for Private Education 626 National Slaughter House 627 Aref Energy Holding 628 Safwan Trading & Contracting 629 Gulf Petroleum Investment 630 Gulf Franchising 631 Credit Rating and Collection 632 National Ranges Co. 633 Burgan Co. for Well Drilling 634 IFA Hotels & Resorts 635 Combined Group Contracting 636 Jeeran Holding 637 Palms Agro Production 638 Al-Safat Tec Holding Co. 639 Mushrif Trading & Contracting 640 United Projects Group 641 Al Abraj Holding 642 Aviation Lease & Finance 643 Al-Mowasat Holding 644 Haj & Umrah Services Consortium 645 Oula Fuel Marketing Company 646 Villa Moda Life Style 647 Future Communications 648 Vending Network Company 649 Hayat Communication Co. 650 Mubarrad Transport Co. 651 Kuwait Resorts Co. 652 Advanced Technology Co. 653 Yiaco Medical Company 654 Jazeera Airways Co. 655 Al Sour Food 701 Livestock Trading & Transport 702 Danah Alsafat Foodstuff Company 703 United Poultry 704 Kuwait Food Co (Americana) 705 United Foodstuff Industries 706 Kout Food Group Non Kuwaities 803 Shuaa Capital + 804 Sharjah Cement & Industrial Dev. 805 Gulf Cement 806 Umm Al-Qaiwain Cement Industries 807 Fujairah Cement Industries 808 Ras Al-Khaimah for White Cement 809 Arab Insurance Group 810 United Gulf Bank 811 Egypt Kuwait Holding 812 Bahrain Kuwait Insurance 813 Gulf Finance House 814 Commercial International Bank 817 Al Khaleej Development 818 Ahli United Bank 819 Bank of Bahrain and Kuwait 820 Ithmaar Bank
+ Company has not yet reported results for the most recent period. ++ Company had not reported results for the previous period due to not being listed then.

14

Kuwait Stock Exchange KSE rallies in April The Kuwait stock exchange (KSE) rallied 12%, to close at 7557 in April, moving synchronously with other emerging and developed markets. The rise in global equity prices which commenced in early March has been resilient thus far. Bullish sentiment has been boosted by better than forecasted Q1 09 results and central banks quantitative easing measures to ward off deflation. Meanwhile, on the domestic front, oil prices reached a five month high, which reinforced GCC markets long term fundamentals. Advancers (104) outnumbered decliners (34) by a large margin. Trading activity increased to a daily average of KD 134 million, up 97% from the previous month. The rise in volume illustrates an increase in investor confidence as market jitters have abated, since the start of the financial crisis in October 08. On a value-weighted basis, the market index rose 10.7% in April. All sector indices posted monthly gains in April. The best performers were industrial, real estate and investment with gains of 17.7%, 17.3 and 12.6 respectively. The out performance of the companies in these sectors is predictable, due to the prevalence of equities held on their books. A significant stock market rally would shore up their balance sheets and postpone the need for new financing as these companies can sell assets at higher prices to settle any maturing debt.
kse Daily performance
250 200
million KD

On April 1, the Kuwait Stock Exchange suspended trading in shares of 36 companies, mostly investment companies, for failing to report their financial results for 2008. By April 30, only 7 of the remaining 36 were still suspended. Global Investment House and Grand Real Estate Company have resumed trading, while Investment Dar has not, sighting difficulty in valuing its assets as the cause behind the delay in reporting. Investment Dar has also focused on a restructuring plan, in consultation with its advisors Credit Suisse, for proposal to its banks and investors. Kuwait Stock Exchange GM Saleh Al Falah has reiterated that the market will halt trading in firms failing to report Q1 09 results by the deadline which ends on May 15. Market capitalization rose to KD 31.3 billion at the end of April, up from KD 28.6 billion one month earlier while the P/E ratio currently stands at 51.2.

REBASED performance
7800 7600 7400
Index

180 160 140 120 100 80 60 40 20 0 Apr 06 Jan 07 MSCI Emerging Oct 07 MSCI Kuwait Jul 08 Apr 09 MSCI GCC

150 100 50 0 1 6 9 14 19 April 2009 22 27 30

7200 7000 6800 6600 6400

Value of Traded Shares (left)

KSE Index (right)

KSE PERFORMANCE BY SECTOR, april 2009

PriceWeighted KSE Index 30-Apr-09 Banking Investment Insurance Real Estate Industrial Services Food Non-Kuwaiti Total Market Kuwaiti Companies
+ Price to earnings (P/E) ratio uses 12-month trailing earnings figure for individual companies For more information on individual companies please refer to NBK Capital

% Change in KSE Index Price-Weighted Apr-09 8.2 12.6 9.6 17.7 17.3 10.4 8.6 7.2 12.0 YTD 09 -7.9 -9.6 -16.4 -6.0 8.2 -3.7 15.5 7.4 -2.9 Value-Weighted Apr-09 9.2 12.2 9.4 21.0 20.5 9.1 8.5 6.2 10.7 YTD 09 -0.8 -16.0 -22.5 -5.0 2.7 -0.9 16.9 1.6 -2.6

Market Cap. (million KD) 30-Apr-09 10,856 3,676 318 2,213 2,548 7,487 671 3,563 31,332 27,769

% to Market 30-Apr-09 34.6% 11.7% 1.0% 7.1% 8.1% 23.9% 2.1% 11.4% 100.0%

Trading Activity (daily average) mn shares 56.8 199.8 0.2 167.4 39.7 189.6 10.3 62.0 725.9 663.9 mn KD 35.3 23.0 0.1 16.7 12.9 30.0 0.9 14.9 133.7 118.8

Price to Earnings + 30-Apr-09 14.5 14.8 21.5 9.4 51.2

8980 6755 2772 3242 5505 14848 3993 8492 7557

15

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