Marmore Mena Intelligence helps us explore the ups and downs of the GCC’s leading businesses and which firms are leading the pack

GCC indices have recorded mixed results so far in 2017, with the year being marked by slow recovery in oil prices and average but improved corporate earnings compared to 2016.

Oman’s benchmark index Muscat Securities Market declined 11.4 per cent in year to date (YTD) terms, the largest decline in the region. The Saudi bourse also registered losses of 4.4 per cent, meaning Saudi and MSM shares bore the brunt of the negative investor sentiment linked to a lack of oil price growth during first half of the year despite an OPEC and non-OPEC deal to cut production.

On the other hand, the price indexes of the Kuwait, Bahrain and Dubai financial markets registered growth of 15.1 per cent, 4.5 per cent and 3 per cent respectively. But the S&P GCC Composite index still decreased slightly by 2.1 per cent, as the drag led by MSM and Saudi Arabia was only partially offset by positive returns in other GCC markets.

Corporate earnings in Saudi Arabia and Bahrain grew by 7 per cent and 6 per cent (year-on-year basis) in H1 2017 respectively. Positive momentum in its non-oil private sector mainly supported Saudi Arabia’s earnings growth. Noticeably the growth in Bahrain’s corporate earnings was attributed to financial services (111 per cent). Overall, H1 2017 was another period of slow recovery for GCC markets after the decline of the oil price in recent years.

Emerging markets have become the favourite destination for foreign investors with US interest rates remaining low. India’s Sensex has gained 19.6 per cent in the YTD and MSCI’s Emerging Markets Index and BRIC Index have gained 29.6 per cent and 35.3 per cent. Markets in advanced economies were also positive with the S&P 500 and the UK’s FTSE increasing by 14.1 per cent and 5.5 per cent respectively.

According to the monthly market’s review published in October 2017 by Marmore, Brent crude closed at $58 per barrel, which represents a YTD increase of only 1.3 per cent. Oil prices increased by 9.9 per cent in September 2017, due to better OPEC compliance with supply cuts and a drop in the number of oil rigs in the US.

GCC countries are turning to both domestic and foreign debt markets to finance their rising fiscal deficits, and this trend is likely to persist in the short to medium term. The drop in oil prices since mid-2014 has shifted the large aggregate current account surpluses of GCC countries, accumulated in the past decade, to a deficit of $28bn in 2016. However as the oil price gradually recovers and fiscal adjustments unfold, the current account balance is expected to return to a surplus of 1.76 per cent of GDP in 2017.

Abu Dhabi Security Exchange is hoping to fast track at least $5bn of stock market listings by state-backed companies next year before Saudi Aramco’s planned $100bn IPO dominates investor demand in the region. Like neighbouring Saudi Arabia, Abu Dhabi is restructuring its industrial sector to lure foreign investors with privatisations after lower energy prices left a dent in its coffers. This could result in at least five large listings including Abu Dhabi National Oil Co’s (Adnoc) fuel distribution unit, aluminium-maker EGA, industrial conglomerate Senaat and Abu Dhabi Ports.

Elsewhere, Bahrain Bourse (BHB) ha inaugurated the Bahrain Investment Market (BIM) – an alternative source of financing for growing businesses in the kingdom and the wider MENA region. The new equity market aims to improve access to finance for small and medium-sized enterprises (SMEs) that do not meet the listing criteria for BHB’s main board.

Cuts in the debt ratings of Bahrain and Oman underline a growing gap between the weakest Gulf Arab economies and the others – a gap which may not yet be fully reflected in market prices. All three major agencies have classified Bahrain’s debt rating as junk. Moody’s also cut Oman’s rating one notch to Baa2, two notches above S&P, which has the country at junk. All three agencies have kept negative outlooks for Bahrain and Oman.
That is a big contrast to the other Gulf Arab oil exporters, which are in investment grade territory and mostly have stable outlooks.

Across the water, Kuwait Finance House (KFH) is looking to merge with Bahrain’s Ahli United Bank, Kuwait’s biggest Islamic lender. The Gulf’s banking sector is consolidating as three years of low oil prices squeeze deposits and push up bad loans. The merger is currently only under study and there has been no agreement so far. This would be a positive step if it closed with the right price. Ahli United Bank is Bahrain’s largest lender and has a presence in Kuwait, Egypt, Iraq, Oman, Libya and the United Kingdom either directly or through affiliates.

The IPO market in GCC was as sluggish in H1 2017 as it was in 2016. The number of merger and acquisition (M&A) deals carried out in the entire Middle East and North Africa (MENA) region in the first half of 2017 fell by 23 per cent year-on-year, according to accountancy firm EY. Only 192 deals were conducted in the region during the first six months, down from 250 in the same period last year.

The biggest deal announced during the period was aircraft leasing company Dubai Aerospace Enterprise’s acquisition of Irish aircraft lessor AWAS Aviation Capital for $7bn. The most active sector in terms of deal values was the oil and gas market, where $11.5bn of deals was done.

Liquidity in most GCC markets has reduced alongside declining investor sentiment. The UAE witnessed poor liquidity among the major markets in the GCC and Saudi Arabia witnessed a sharp reduction of more than 50 per cent in its turnover ratio in 2017.

Road Ahead

Persistent low oil prices have led GCC governments to fast track reforms, both on the revenue and expenditure side. The introduction of VAT by the UAE and Saudi in 2018 is an example of such structural changes made by governments. Other GCC countries are also expected to follow suit, with a removal or reduction in subsidies and fast tracking of diversification plans expected to be
at the centre of policy decisions.

As per Marmore’s estimates, corporate earnings in the GCC are expected to climb by 8.1 per cent in 2017. Earnings are mainly driven by the commodities and financial sectors, which are expected to grow by 13.7 per cent and 9.9 per cent respectively. The banking sector is expected to remain flat for 2017 and the telecoms sector is expected to marginally decline by 1.2 per cent. Overall, the GCC market is expected to show improvement, as oil prices hover around $55 per barrel, and there are positive indications from expected corporate earnings in 2017.

Read: Revealed: Top 10 companies in Saudi Arabia in 2017

Read: Revealed: Top 10 companies in Bahrain in 2017

Read: Revealed: Top 10 companies in Kuwait in 2017

Read: Revealed: Top 10 companies in the UAE in 2017

Company NameCountry Market Cap ($BN)20172016
Saudi Basic Industries CorporationSaudi Arabia78.4011
Emirates Telecommunications Group CoUAE42.6223
Saudi Telecom CompanySaudi Arabia36.9134
First Abu Dhabi BankUAE31.164N/A
Al Rajhi Banking & Investment CorporationSaudi Arabia27.3055
National Commercial BankSaudi Arabia25.7967
Saudi Electricity CompanySaudi Arabia25.4476
DP World LtdUAE18.4389
Emaar PropertiesUAE16.96911
Jabal Omar Development CoSaudi Arabia16.111012
National Bank of KuwaitKuwait15.321117
Saudi Arabian Mining CoSaudi Arabia15.031219
Almarai CoSaudi Arabia14.211316
NasdaqUAE12.6114N/A
Emirates NBD BankUAE12.481515
Samba Financial GroupSaudi Arabia12.111621
Emirates Islamic BankKuwait11.8317N/A
Kuwait Finance HouseKuwait11.421824
Abu Dhabi Commercial BankUAE10.361920
Saudi British BankSaudi Arabia10.242027
Kingdom HoldingSaudi Arabia9.982118
Riyad BankSaudi Arabia8.722225
Yanbu National Petrochemicals CoSaudi Arabia8.522330
Banque Saudi FransiSaudi Arabia8.362433
Dubai Islamic BankUAE8.362531
Emaar MallsUAE8.042622
Mobile Telecommunications CompanyKuwait7.352738
Alinma BankSaudi Arabia6.822839
Emirates Integrated Telecommunications CompanyUAE6.782926
Saudi Arabia Fertilizers CoSaudi Arabia6.673029
Damac Properties Dubai CoUAE6.413147
Arab National BankSaudi Arabia6.013230
Savola Group CompanySaudi Arabia5.823341
Ahli United BankBahrain5.183478
Aldar PropertiesUAE5.143537
Agility Public Warehousing CoKuwait3.663693
Makkah Construction and Development CoSaudi Arabia3.5737N/A
Mashreq BankUAE3.533852
AlawwalSaudi Arabia3.5139N/A
Jarir Marketing CoSaudi Arabia3.504088
Boubyan BankKuwait3.404160
Saudi Kayan Petrochemical CoSaudi Arabia3.344269
Company for Cooperative InsuranceSaudi Arabia3.334383
Abu Dhabi Islamic BankUAE3.304455
Union National BankUAE3.184557
National Shipping Company of Saudi ArabiaSaudi Arabia3.124654
Etihad Etisalat CoSaudi Arabia3.114743
Bank AlbiladSaudi Arabia3.044870
Emaar The Economic CitySaudi Arabia3.034961
Commercial Bank of DubaiUAE3.005042
Rabigh Refining and Petrochemical CoSaudi Arabia2.985171
Dubai InvestmentsUAE2.785277
Saudi Investment BankSaudi Arabia2.765394
Bank MuscatOman2.755467
Kuwait Food CompanyKuwait2.645551
Oman Telecommunications CoOman2.635656
National Industrialisation CompanySaudi Arabia2.635775
Saudi Industrial Investment GroupSaudi Arabia2.5858N/A
Ahli United BankKuwait2.575940
Gulf BankKuwait2.556074
Burgan BankKuwait2.546180
Dubai Financial MarketUAE2.536263
Mabanee CompanyKuwait2.476372
Bupa Arabia for Cooperative Insurance CompanySaudi Arabia2.446479
Advanced Petrochemical CoSaudi Arabia2.376584
Fawaz Abdulaziz Alhokair CoSaudi Arabia2.2466N/A
National Petrochemical CoSaudi Arabia2.246787
National Bank of BahrainBahrain2.206882
Commercial Bank of KuwaitKuwait2.186989
National Bank of Ras Al KhaimahUAE2.167073
Mouwasat Medical Services CoSaudi Arabia2.1171N/A
Saudi Ground Services CoSaudi Arabia2.017286
National Mobile Telecommunications CoKuwait2.007392
AramexUAE1.9974N/A
Aluminium BahrainBahrain1.9475N/A
Saudi Airlines Catering CoSaudi Arabia1.867697
Dar Al Arkan Real Estate Development CompanySaudi Arabia1.8377N/A
Al Tayyar Travel Group Holding CompanySaudi Arabia1.7878N/A
Kuwait Projects Company HoldingKuwait1.717965
HumanSoft Holding CompanyKuwait1.6880N/A
Al Ahli Bank of KuwaitKuwait1.6781100
DXB EntertainmentsUAE1.678253
Southern Province Cement CoSaudi Arabia1.678376
GFH Financial GroupBahrain1.6284N/A
Bank AljaziraSaudi Arabia1.5985N/A
Saudi Cement CoSaudi Arabia1.598681
Sahara petrochemical coSaudi Arabia1.5787N/A
Taiba Holding CoSaudi Arabia1.5688N/A
Dallah HealthcareSaudi Arabia1.5689N/A
Dana GasUAE1.5490N/A
National Central Cooling CoUAE1.5291N/A
Air ArabiaUAE1.5192N/A
Middle East Healthcare CoSaudi Arabia1.4993N/A
National Bank of FujairahUAE1.4994N/A
Saudi International Petrochemical CoSaudi Arabia1.4595N/A
Abdullah Al Othaim Markets CoSaudi Arabia1.4496N/A
National Bank of Umm Al QaiwainUAE1.439791
Saudi Research and Marketing GroupSaudi Arabia1.4198N/A
Kuwait Telecommunications CompanyKuwait1.3199N/A
Arabtec HoldingUAE1.2410098