GCC markets end year 2017 with a strong performance

Global equities continued positive momentum

KUWAIT: Global equities continue their positive streak for the year, with the MSCI All Country World Index up 1.5 percent in December, bringing the full year performance to 21.6 percent. In the US, the Federal Reserve raised interest rates by 0.25 percent, as markets had anticipated, in their December meeting. President Trump has also officially signed the tax reform law, in an effort to lower rates on corporate and household taxes, and is expected to result in a $1.5 trillion tax cut. In Europe however, political uncertainty continues to take center stage, as the pro-independence parties won a majority in Catalonia’s regional election and Italy passed its 2018 budget, allowing for the dissolution of parliament and new elections. Commodities ended December in the green with Gold and Brent up 2.2 percent and 5.2 percent, respectively with full year performance at 13.5 percent and 17.7 percent. OPEC continues to be compliant with the output curbs, realizing 121 percent of their pledged cuts in December.

In the US, the Markit Manufacturing Purchasing Managers Index (PMI) came in at 55.1 for December, up 1.2 points from the previous month while the Services PMI came in at 53.7, below November’s reading of 54.5 due to a drop in new orders, hiring and business optimism. Initial Jobless Claims went up to 245,000 compared to the last reading of 238,000. Durable Goods Orders increased 1.3 percent in November compared to the 0.4 percent decrease in October, boosted by civilian aircraft orders, which rose 14.5 percent for the month to $12.5 billion. Housing Starts rose 3.3 percent to 1.297m in November, driven by starts for single-family homes up 5.3 percent to 930,000, the highest increase since 2007, while building permits fell 1.4 percent to 1.298m. Retails Sales is up 0.8 percent month-on-month in November, exceeding expectations of 0.3 percent, as consumers were getting ready for the holidays. Gross Domestic Product in the third quarter grew at 3.2 percent annualized, supported by strong business spending, specifically nonresidential fixed investment.
US equities were positive in December up 1.8 percent and 1.0 percent for the Dow Jones and S&P 500, respectively and full year are up 25.1 percent and 19.4 percent.

In the UK, manufacturing continues to witness above average growth despite the Markit Manufacturing PMI dropping to 56.3 in December compared to 58.2 in November. The Services PMI on the other hand came in higher than expected at 54.2, compared to November’s reading of 53.8. The Consumer Price Index (CPI) increased by 0.3 percent in November, putting the annual inflation rate at 3.1 percent, its strongest since March 2012. Retail Sales came in surprisingly strong in November, up 1.1 percent, indicating that the continuous drop in Consumer Confidence, currently at -13, has yet to impact household spending. The final reading for the Q3 GDP remained unchanged at 0.4 percent, with the annual rate revised up to 1.7 percent.

UK recovered from last month’s loss, up 4.9 percent in December, as measured by the FTSE 100 and is up 7.6 percent for the year.

In Europe, the Markit Manufacturing PMI went up slightly to 60.6 in December compared to 60.1 in November on the back of new orders driven by domestic and international demand. The Services PMI came in slightly higher at 56.6 compared to November’s reading of 56.2. Consumer Confidence is expected to continue to improve in December, on a preliminary basis at 0.5 percent compared to November’s reading of 0.1 percent.

European equities were positive, up 0.6 percent in December, recovering from the previous month’s loss, as measured by the Stoxx Europe 600. For the year, the index is up 7.7 percent.

In Japan, the trade surplus decreased to JPY 113B in November from JPY 285B in October as exports increased by 16.2 percent and imports slowed to 17.2 percent. The CPI increased in November by 0.7 percent month-on-month, however the annualized figure remains well below the Bank of Japan’s 2 percent inflation target. The Nikkei Manufacturing PMI came in at 54.2 in November higher than October’s figure of 53.6. Retail Trade recovered in November up 2.2 percent, following October’s loss of 0.2 percent while Housing Starts dropped 0.4 percent year-over-year in November.

Japanese equities ended the month and year up 0.2 percent and 19.1 percent respectively, as measured by the Nikkei 225.
In domestic currency terms, Chinese exports grew 10.3 percent in November from 6.1 percent in October, indicating stronger external demand in key markets, while imports slowed slightly to 15.6 percent from 15.9 percent. The trade surplus widened to CNY 263.6B in November from CNY 254.5B in October. The CPI was flat in November yet increased by 1.7 percent for the year. Retail Sales increased 10.2 percent year-on-year in November, largely due to communication equipment sales, which grew 33.9 percent for the year compared to 2.1 percent in October. The Caixin Manufacturing PMI for December came in at 51.7, higher than November’s reading of 50.8, while the Services PMI increased from 51.9 to 53.9 in December.

The MSCI Emerging Market Index ended the month of December in the green 3.4 percent. The index also registered gains of 34.4 percent for the year, proving to be the best performing global index. Chinese equities ended the month in the red for the second consecutive month, down slightly 0.3 percent in December however full year performance the index is up 6.6 percent.

The GCC equity markets performed well in December with the MSCI GCC Countries Index ending the month up 3.3 percent and the year up 0.7 percent. The best performing index for the month was Qatar’s DSM Index, up 10.5 percent followed by Bahrain up 3.7 percent, Saudi Arabia up 3.2 percent, and Abu Dhabi and Kuwait up 2.7 percent and 0.7 percent respectively. For the second consecutive month, Dubai was the worst performing GCC index, down 1.5 percent followed by Oman down 0.2 percent. For the full year performance, Bahrain was the best performing index, registering gains of 9.1 percent, followed by Kuwait up 5.6 percent and Saudi Arabia up 0.2 percent. The worst performing index in 2017 was Qatar down 18.3 percent, followed by Oman down 11.8 percent and Dubai and Abu Dhabi down 4.6 percent and 3.3 percent respectively. Egypt’s EGX 30 ended the month and year in the green 3.0 percent and 21.7 percent respectively.

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