KUWAIT CITY, March 19:  Kuwait Financial Centre “Markaz”, one of the Middle East’s leading investment banking and asset management companies, announced it ended the fiscal year 31st December 2012 with a net profit of KD 4.22million as it unveiled the 2012 financial results at an Annual General Meeting (AGM) with Shareholders held Tuesday at the Ministry of commerce.
The Company reported a net profit of KD 4.22 million, or 9 fils per share, compared to a net loss of KD 0.23 million or 1 fils per share in 2011 which occurred primarily due to turbulences in local and international investment environments during that year.
Diraar Yusuf Alghanim, Chairman of ‘Markaz’ said “Amidst these conditions in the global and local markets and the investment sector during 2012, ‘Markaz’ has sustained its approach in favor of financial prowess and preserving its investments.
“We continued to steadily rely on high quality assets, low debt-to-equity ratio and high operational income. We were able to preserve our investments during this tough year because of ‘Markaz’ stable income from fees of international and local equity funds and real estate funds in addition to our profitable exits from private equity funds and fee income from investment banking services. We look forward to better results as economic climates improve next year”, added Al Ghanim.

Manaf Alhajeri, Chief Executive Officer of ‘Markaz’ said “Markaz’s main objective is to preserve strong solvency that enables the company to support its activities and maximize shareholders’ equity. Therefore, ‘Markaz’ continues to adopt conservative policies that include allocating sufficient provisions against investment risk and managing liquidity to overcome volatility in local and international markets.”
Markaz improvement in earnings came as a result of favorable returns from investments across all asset classes which amounted to a gain of KD 5.2 million compared with a loss of KD 2.2 million in 2011.
As of December 31, 2012, Markaz total Equity increased to KD 94.22 million as compared with KD 87.55 million in 2011, an increase of 8%.  Meanwhile, Markaz total Assets Under Management (AUM) reached KD903 million as of December 31, 2012, an increase of 9% compared to the year 2011. 
As for Central Bank of Kuwait (CBK) stipulated ratios, the leverage ratio for Markaz stood at 0.32 against the 2.0 ratio set by the Central Bank. The quick ratio of Markaz arrived at 17%, which is higher than the minimum of 10% imposed by the Central Bank of Kuwait. These ratios reflect Markaz ability to honor its obligations due to adequate solvency levels.

In June 5, 2012 Markaz repaid all of its USD 100 million bonds issued in July 2007 on the specified maturity date. Markaz ability to timely honor its financial obligations despite the credit complications in the regional investment climate is a testament of the company’s strong financial position.
Meanwhile, Markaz’s Board of Directors proposed to the General Assembly the distribution of a cash dividend of 6% of the par value, or 6 fils per share, for shareholders registered at the time of the AGM on Tuesday.
Ali Khalil, Chief Operating Officer in ‘Markaz’ highlighted the Company’s activities in 2012 and analyzing the economic environment in the region sector by sector, said that Saudi Arabia, the largest economy within the region is expected to witness a real GDP growth of 5.4% and inflation subsiding below 4% for the year. Saudi stock exchange-TASI witnessed significant increase in turnover during the first few months of 2012 as the average turnover during the initial few months were beyond USD 2 billion/day; Post April 2012, turnover gradually reduced to approx. 25%.

Kuwait’s political Issues were the key focus during 2012, which kept on dragging the potential economic progress. Kuwait and Bahrain ended the year with marginal gains while Oman had marginal losses. Qatar, the economy which witnessed double digit economic growth during the past decade, lost heat and witness the real GDP growth of 6.3% for the year. The Qatari market ended the year with a gain of 2%. UAE stock markets were among the best performing markets within the region; The Dubai property market reclaimed global spotlight.
Egypt was the most volatile market with its high political drama in first half of 2012. Political uncertainty during the last quarter of 2012 did not go well with the market. Despite the recent stock market fall, Egypt was able to pull back the losses it witnessed during 2011.
As the year of 2012 folded, most equity indices globally recorded gains. MSCI World Index surged 13.18% and MSCI Emerging Market robustly climbed 15.15%.  The Dow, S&P, and NASDAQ climbed 7.26%, 13.41%, and 15.91% respectively in the year. European markets continued its bull march as the MSCI Europe Index rallied 15.15% for the year.

Markaz strategy is paying off well as the 39-year old Asset Management and Investment Company adopted a less aggressive approach by altering asset allocation throughout the year by lowering exposure in equities and adding positions in fixed income and hedge funds. In fact, Emerging Market fixed income market ended 2012 as the top performing asset class across both EM and DM fixed income and riskier equity markets, providing equity-like returns ranging from 13% to 16%.
Markaz’s portfolios posted positive returns for the year 2012. Both Atlas Diversified Class, investing in a portfolio of global funds, and Atlas Emerging Market Thematic Class Fund, which invests in a portfolio of Emerging Markets equity funds focusing on selected themes, enjoyed a healthy performance during the year. Moreover, Atlas ETFs Program, which allocates its assets into various Exchange Traded Funds globally, and our long/short product, Creative Investment Program, posted positive performance in the same period.

The private equity asset class is recovering post-crisis and continues its march forward. The debt markets are healthy, allowing for significant delivering and a moving of the maturity wall. LPs are not reducing but rather increasing their exposure, which is the result of private equity continuing to deliver attractive returns. Net Asset Value are increasing relative to distributions, indicating future distribution, although dry powder remains quite extensive.
Nevertheless, the industry continues to make healthy progress toward recovering from its steep contraction following the financial crisis. The number of private placements in 2012 is just slightly below the all-time high for the industry, driven by expansion into new emerging markets and spin outs from existing fund managers. The Markaz Private Equity Portfolio continued to cash in on its tail end funds through secondary sales and overall the portfolio saw positive distributions from the remaining portfolio.

In Kuwait, investment banking activity has been adversely impacted by market conditions and the delay in the launch of the much anticipated Private-Public investment initiative led by the Partnership Technical Bureau (PTB).  As with the rest of the region, the government has placed greater emphasis on social programs at the expense of infrastructure development, which has fueled consumer spending. 
The debt crisis continues to linger in Kuwait, with no signs in the horizon of easing up as the current legal environment is not conducive for consensual restructuring plans.  This continues to unfavorably impact a large number of real estate and investment companies, requiring more than ever highly specialized advisors to help them restructure their balance sheets.
Notwithstanding, Markaz is optimistic that the market is well poised for recovery.  The debt capital market, is witnessing tightening spreads with average yield on investment grade bond narrowing from an average of 4.9% at the beginning of the year to a current 3.21% which is likely to translate to an increased demand for corporate debt in 2013.  Also, the new companies’ law number 25 of 2012 provides for the issuance of various debt and quasi debt structures; which allow company to rethink their capital structure and issue new instruments in the market.


By Iddris Seidu
Arab Times Staff