Dow Jones Islamic Market Indexes in July: Kuwait’s Comeback…..
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July was the month of turnarounds, although stock market performances were volatile in the East and West. Perhaps the most surprising move of the month came from the Kuwait Stock Exchange (KSE).
The KSE has been the long time problem child of the Gulf Co-Operation Council (GCC), the economic and political union of which Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman are members. Its results have been less than stellar for some time and have consistently lagged its GCC neighbors.
The Dow Jones Islamic Market (DJIM) Kuwait Index ended 8.51% higher at 883.82 points (as of the close of trading of July 26th). The northern Gulf State benefited from advancing oil prices and remarks made by the International Monetary Fund (IMF) that Kuwait’s economic outlook, shattered in 2009 by low energy prices and political uncertainty, is overall positive regarding the second half of 2010. The price for the “black gold” surged during the last three weeks by 8% to around US$78 per barrel, pushing the DJIM Oil and Gas Index up by 9.91% to 3,150.62 points, the highest DJIM sector index profit in July. An astounding 90% of Kuwait’s national budget is based on oil-related revenues.
The DJIM Kuwait Index was only topped by the DJIM China Offshore Index, which jumped 10.16% higher at 2,746.52 points. The third highest gainer was the DJIM Europe Titans 25 Index (up 8.13% at 1,905.04 points).
As a direct comparison, the global bellwether, Dow Jones Industrial Average, which feels the pulses of 30 U.S. blue chips, added 7.69% for the month. It closed at 10,525.43 points.
Two Islamic composites which retreated slightly were the DJIM India Index (down 0.76% at 1,863.82 points) and the DJIM Philippines Index (1.25% lower at 1,524.50 points). On the other hand, all DJIM industry indexes gained territory in July.
As stock markets advance, Islamic bonds became less attractive for investors. The Dow Jones Citigroup Sukuk Index added 0.12%, finishing at 120.99 points. Only dollar-denominated Sukuk which are rated investment grade can be included in this index. Components include the General Electric (GE) Capital Sukuk Ltd. and the Islamic Development Bank (IDB) Trust Services Ltd.
Meanwhile, the Islamic Finance industry extends its period of consolidation and careful expansion. Kuwait’s largest Islamic bank, Kuwait Finance House (KFH) is eyeing setting up branches in the U. S., Canada and China.
“We see new optimism in the Middle East,” says Imad Ghandour, Executive Director, Private Equity at Gulf Capital in Abu Dhabi. According to Ghandour, PE firms in the Middle East and North Africa raised an impressive US$1.25 billion in the first quarter of 2010, an 18% increase over all of 2009, as regional economies recovered and investor appetite returned.
“But investors do not look for excessive rate of returns in short time periods anymore. They look for sustainable projects and assets with quality”, continues Mr. Ghandour, explaining the new paradigm.
Islamic finance, Mr. Ghandour argues, which shuns speculation and investment vehicles based on pure cash flows, can help to achieve these goals.
Author: Gerard Al-Fil
Source: ETFWorld – Dow Jones Indexes
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