Kuwait’s stock market is expected to continue performing well in 2018, leading gains across the GCC’s markets, supported by fiscal stimulus.
According to the latest Global Investment Outlook report from First Abu Dhabi Bank (FAB), index inclusion and sustained economic growth remain key themes for Kuwait in 2018.
Recent announcements upgrading Kuwait from frontier to emerging market status should help drive fund flows into the country’s markets, given earnings growth at reasonable valuations. Companies in the financial sector look particularly well-positioned to leverage fiscal stimulus.
“Kuwait was the best performing market in the GCC in 2017, with a price-weighted index return of 16.9 per cent. Historically underperforming Saudi and UAE markets, Kuwait has led GCC markets throughout most of 2017. We expect this trend to continue in 2018 given the room for fiscal stimulus,” the report said.
FAB’s analysts said in the report they remain positive on the UAE market, “helped by Dubai’s relatively diversified economic base,” as well as funds flows and a safe-haven status.
FAB pointed that in the UAE’s banking stocks, the majority trade at discount to related market benchmarks, suggesting banking stock prices have room to trend higher.
Outside the GCC, Egypt looks well-positioned to maintain its economic recovery following the devaluation of the Egyptian pound in late 2016. FAB said in its report it remains positive on the Egyptian market as it expects more interest rate cuts, a pickup in capital and consumer spending, and further measures to improve economic performance.
Globally, FAB is expecting world growth forecasts to be revised upwards, to 4 per cent for 2018, led by developed countries. The bank’s analysts said they favour equities as an asset class for 2018, but anticipates higher equity price volatility and for technology stocks to outperform over the year.
FAB’s investment team’s largest overweight position remains Asia-Pacific equities (excluding Japan), the bank said. It is recommending underweighting developed market government bonds, anticipating three interest hikes from the Federal Reserve in 2018 and at least two in 2019.
“We are particularly bullish about the Asia-Pacific region, and in no way share the conventional view that China will fail in its economic transformation,” said Alain Marckus, head of investment strategy for products and services at wealth and private banking at FAB.
“New all-time highs in the major equity indices, led by the US, is what we have been positioned for, and this is the backbone of our ‘risk-on’ call, driven by world growth ...”