Local Real Estate Market – August 2010

The latest available data for the weekly trading of August until September 2, 2010, Ministry of Justice, Department of Real Estate Registration and Authentication, indicates that total sales value (contracts and agencies) was about KD 111.8 million, which is 14.2% lower than July’s liquidity of KD 130.4 million, which means there has been a sustained plunge in the market’s liquidity since June 2010.
It, however, went up slightly by 0.3% compared with the figures in 8/2009 when it was KD 111.5 million, says the Al-Shall Weekly Economic Report published Al-Shall Consulting Co., headed by Jassem Al-Saadoun.
A comparative reading of the total trading of 2010 -until the end of August 2010- shows that total value of sales, both contracts and agencies, was about KD 1425.7 million. The private housing sale value was about 58% of the total, the investment took about 36.3% of the total, the commercial about 5.3% and warehousing 4%. The comparative graph for the earlier part of 2010 and the same part in 2009 shows there is a rise in the market’s liquidity in general associated with a rise in the liquidity of private housing activity which went up by 72%; investment housing liquidity went up by 23.1% in the same period last year but its contribution of the total sales decreased due to a high contribution of the private housing. On the other hand, the commercial activity liquidity dropped noticeably by 68.9% compared with the same period in 2009.
When we compare the average value of real estate deal sales during the early part of 2010 with the total value of those sales in 2009, we notice a noticeable decline in the per deal value which was KD 298,600 (KD 360,000 in 2009). This means the second drop since 2005 after the slight drop in 2009 by 2.6% compared with 2008. It also dropped this year by 17.1%. As for the sectors, value of real estate sales for private activity rose by 6.4%. On the other hand, the value of commercial, private and warehousing deal value dropped by 52.7% and 15.6% and 50.5% respectively, which directly affected the drop in the total average per deal value of all real estate sales, which reflects the current situation of the market where there is a surplus in the demand.
Assuming the market liquidity continues in the remaining part of the year—4 months—at the same current level, market trading value -contracts and agencies—would score KD 2138.6 million, which is KD 260.7 million higher (13.9%) than the 2009 value when it was about KD 1877.9 million, which is a noticeable rise consistent with the post-crisis situation, in case the real estate market’s liquidity continues its rise in the 4th quarter of 2010.
Major Global Economic Changes
During the First World War era (1914- 1918), Great Britain changed from a net creditor to the USA by about US$ 3 billion at the beginning of the war to a debtor of the same amount to the USA at the end of the war. That was associated with the shift of global economic weight and the biggest power title to the United States. The US dollar began to change to the global reserve currency, while Great Britain, which returned to the gold standard, failed to contain that during the Great Depression period in the 1930s. In shaping the new financial regime in 1944 through the participation of John Meynard Keynes, the regime was built with its international institutions in the United States, the new world center and aroundt the US dollar, the American currency, which became convertible to gold on demand at US$ 35 rate per gold ounce.
In July 1971, wars -Korea, Vietnam and Proxy Wars during cold war- forced the USA to abandon the gold standard. The change of the USA to a net debtor and the accumulation of balances of what was then called the Euro-dollar resulting from financing wars by printing more paper dollars were the main cause for American troubles. China, which suffered from starvation at the end of 1950s and early 1960s and the early beginnings of the Cultural Revolution in the 1970s, meanwhile picked up the sign of the second major change and sowed the right seed for its change to the market economy in the 1970s. As major changes take long decades -perhaps a century- to complete as in the example of shifting the economic center of gravity from East to West in the 18th and 19th centuries, then from West to the far West at the end of the 19th century until the end of the first half of the 20th century, the shift seed to the East was sowed in the 1980s; features of the forthcoming change began to crystallize in the first decade of the 21st century and may not be completed until the middle of the century.
In 2010, debts of the Federal US Government were about US$ 13.2 trillion, or 90% of gross domestic product (GDP), and will increase to US$ 16.2 trillion if various US debts are added. In a government analysis on the sound federal financial position (A Citizen’s Guide to the 2009 Financial Report of the US Government), the probable impact of the global financial crisis in expediting the major shift process is discussed. The Federal budget deficit increased from US$ 275.5 billion in 2007 to US$ 1417.2 billion in 2009. In a warning against aggravating the situations, the report estimates the public debt for the US federal government will be equal to 700% of GDP by 2080 if the situation goes unchecked. On the other hand, the surplus countries in the world finance the American treasury. The biggest two creditor states to the US are the Japanese and Chinese governments.
While China -and India- excel in economic growth rates by 4-5 times the American and European rates -with 37% of the world population- the debt level aggravation deteriorates confidence in indebted economies but enhances it in creditor economies in the long term. This will be the prescription or the economic weight crossing bridge together with the restoration of glory to the East two centuries after its loss. The former German Minister of Finance believes that by 2050 the Chinese economy will be equal to 1.79 times (179%) of the American economy.
In Kuwait, we still believe that development is a spending figure and not growth, manpower and education; the future is government by “Spend what you have now and do not bother about the future” principle while the world makes its calculations until 2050 and 2080 not for each state separately, regardless of its might, but for others and their probable position from those changes and confrontations.
Boubyan Bank Financial Results – 30 June 2010
Boubyan Bank has announced its results for the first 6 months of the current year for the period ending June 30, 2010. These results indicate the bank achieved profits of about KD 3.04 million, a rise of KD 14.8 million (125.9%) vis-à-vis losses of about KD 11.8 million for the same period last year. The profit margin rose by 11.03% from negative—42.8% for the same period last year. The reasons for the positive change in the bank’s performance are due to a noticeable drop in investment losses, by about KD 12.5 million to KD 1 million in June 2010 (KD 13.5 million in the same period 2009), a drop of by 92.6%. The revenue total increased slightly by KD 87,000 to KD 27.6 million in June 2010 (KD 27.5 million in the same period of 2009). Revenues from fees and the commissions item rose by KD 2.7 million in June 2010 to KD 4.9 million compared with KD 2.1 million, or 127.2%. revenue from murabahat and Islamic financing increased by KD 108,000 while investment revenue dropped by KD 2.1 million to KD 3.5 million (KD 5.6 million in June 2009).
The bank’s financial statements indicate that the bank’s assets registered an increase of about KD 201.4 million -20.9%- to KD 1166.1 million (KD 964.8 million in the end of 2009). The gross total assets rose by KD 222.9 million -23.6%- (KD 943.3 million at the first half of 2009). The Islamic financing item to clients increased by KD 134.2 million or 23.3% to KD 710.7 million (60.9% of total assets) compared with KD 576.5 million 59.8% of total assets) at the end of 2009. It went up by 37.1% (KD 192.4 million) compared with the same period 2009 when it was KD 518.3 million (55% of total assets). Balance due from banks on June 30, 2010 rose to about KD 67.7 million or about 39.7% to KD 238.4 million (20.4% of total assets), compared with KD 170.6 million (17.7% of total assets) in the end of 2009, rising by 25.1%, KD 47.9 million, vis-avis KD 190.5 million (20.2% of total assets) in the same period 2009. The item of investments available for sale dropped by 11.4% in June 2010 (KD 7.5 million) reaching KD 58.7 million (5% of total assets) compared with KD 66.2 million (6.9% of total assets in the end of 2009). When we compare it with the same period of 2009, we find it dropped by 13.3%, or about KD 8.9 million from KD 67.7 million (7.2% of total assets) in June 2009.
An analysis of the bank’s financial statements indicates that the bank’s profit indexes went up; return on equity index (ROE) from minus 8.4% in the end of June 2009 to positive 1.7% at the end of June 2010. Return on the bank’s assets index (ROA) rose to 0.29% (minus 1.32% at the end of the first half of 2009). Return on capital index (ROC) went up as well to 1.7% (minus 10.1% for the same period 2009). EPS scored 1.85 fils versus losses by 8.42 fils for the same period last year, thus the bank achieved an annual return on the market value per share of 0.4% (minus 1.8% in June 2009).
More important is the fact that the bank shifted to profitability. Comparing it with its losses means that it took adequate, and perhaps more provisions. Any projection in the future implies continued improvement of profits and the probability that the bank might distribute profits in 2011, which is a good matter.
Comparative Performance of Selected Stock Markets
While positive stock markets in the region at the end of July were 6 vis-àvis the beginning of the year, only 3 positive ones remained until the end of August with the impact of the second bump which we anticipated three months ago, the concern over the health of the American economy. The performance of 6 out of 11 was in the negative zone ranges, between 0.3% and -4%, as compensation for them is easy. It is expected that most of them will return to a positive performance during this month when probabilities of the American economy drifting into the double recession phase (W) fade out.
Three out of the last 5 markets, whose losses range between 8.9% and 19.5%, might remain in the negative zone until the end of the year, namely, China, Dubai and Japan, the last one due to the unprecedented rise in the Yen’s exchange rate which endangers the Japanese economic competitiveness. All global markets suffered from the huge losses in the second quarter of the year which consumed all first quarter’s gains for 12 of them; however, 11 markets out of 14 restored some of their gains, or reduced their losses in the first two months of the third quarter.
The comparative performance until the end of August 2010 for 14 selected stock markets:
In the comparative performance for 8 months of 2010, the weighted index for KSE still takes the lead in the list of best performing markets in the 14 - markets list. This difference increased in August by gaining 13% compared with the end of 2009 and with a big difference in the Qatari market (the second) which gained 3.9% during the same period, followed by the Indian market which gained 2.9%. These three are the only markets in the positive region. In August alone, 8 out of 14 markets sustained losses. The major loser was the Japanese market which lost 7.5% and the French which lost 4.2%. On the other hand, Kuwait’s weighted index topped the list of the 6 winning markets in August adding 4% to its gains, followed by the Qatari, which added 2.8% to its gains. Kuwait’s price index is still in 10th position with losses of about 4.5% compared with the beginning of the year.
The Weekly Performance of Kuwait Stock Exchange
The performance of the Kuwait Stock Exchange (KSE) last week was mixed compared with the previous one as the indices of the traded shares volume decreased, while the traded shares value and the number of transactions and the general index showed an increase. The AlShall Index (value weighted) closed at 533.5 points last Wednesday, showing an increase of 14.6 points or about 2.8% compared to previous week’s closing, but it increased by 93.9 points or about 21.4% compared to the year end 2009.
The following tables summarize last week’s performance of KSE:
Description Week 36 Week 35 Dif
08/09/2010 02/09/2010 %
Working days 4 5
Al Shall index (41 Companies) 533.5 518.9 2.8%
KSE index 6,757.1 6,703.2 0.8%
Value Trade (KD) 159,062,070 145,821,380
Daily average (KD) 39,765,518 29,164,276 36.4%
Volume Trade (Shares) 522,072,500 693,530,000
Daily average (Shares) 130,518,125 138,706,000 -5.9%
Transactions 11,630 11,841
Daily average 2,908 2,368 22.8%
Most Active Sectors & Companies
Description Value Traded % of Total
Sectors KD Market
Banking Sector 77,629,100 48.8%
Services Sector 45,052,310 28.3% Industrial Sector 12,565,040 7.9%
Description Value Traded % of Total
Companies KD Market
National Bank of Kuwait 22,753,550 14.3%
Kuwait Finance House 21,820,400 13.7%
Zain 21,337,400 13.4%
Kuwait International Bank 9,899,600 6.2%
Gulf Bank 7,863,800 4.9%
Total 836,74,750 52.6%


Week 36 Week 35
Increased value (# of companies) 08/09/2010 02/09/2010
Decreased value (# of companies) 16 14
Unchanged value (# of companies) 10 13
Total Companies 41 41