While global stock markets are in the doldrums, the energy price hike has fuelled growth in the oil-backed economies in the Arabian Gulf – with sovereign wealth funds receiving a boost in performance.
Thursday’s agreement between the Organization of Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, to slash crude oil output by 2 million barrels per day – the largest reduction since 2020 – has boosted the GCC region’s stock markets even further with the prospect of sustained high oil prices supporting regional economic growth. The agreement comes ahead of an EU embargo on Russian oil, squeezing supplies in an already tight market and adding to global inflation.
Global indices showed poor performance in the year-to-date with the S&P 500 down 22%, Dow Jones down 18% and FTSE-100 down nearly 7%. In contrast, the Gulf markets were boosted by the influx of liquidity from oil revenues with robust growth in the main indices. The star performers were Abu Dhabi’s FTSE ADX General (FTFADGI) (up 16.5%) and Qatar’s QE General Index (QSI) (up 12.1%), according to the most recent data.
Compared to global equivalents, SWF-owned local telecoms stocks saw the same downside as global majors such as Verizon, while producers of commodities such as oil, gas and minerals saw stronger growth. Where local equities bucked the trend was in the financial sector, with the injection of liquidity due to energy price growth helping to support local banks, while global majors such as Bank of America were impacted by market volatility and the threat of recession. As such, this provided a boost to Gulf SWF asset values in the financial sector. Strong economic growth also supported property markets, helping raise the value of local real estate developers even as doubts grew elsewhere in the world over asset values.
Global SWF has analysed the main winners in the local market surge and has found that the Saudi Public Investment Fund's (PIF) stake in Aramco has provided a considerable boost to its AUM with the Saudi oil producer’s stock up 11.4%, adding around US$8 billion to the value of its 4% stake. Mining company Ma’aden has also seen its stock price soar in the year-to-date, despite dropping off in recent weeks, due to a capital hike approved in May and the commencement of operations at its Ammonia 3 plant, which commenced operations in Q2.
Yet, in terms of stock price growth, Abu Dhabi’s ADQ saw some of the strongest growth, assisted by the listing of its assets. The relatively new fund is recycling funds raised from the divestment of domestic infrastructure assets into foreign private equity investment. ADQ’s sale of an 8.6% stake in Abu Dhabi National Energy Company (TAQA), which has significant investments in power and water generation, transmission and distribution assets and oil and gas assets, last month to Multiply Group, Abu Dhabi Pension Fund and other investors has bolster the stock price by 97% y-t-d. Similarly, the listing of AD Ports in February has fuelled the rise of its stock by 64%. Abu Dhabi contractor National Marine Dredging Company’s (NMDC) decision in April to allow non-Emirati nationals to own 49% in an effort to diversify its shareholding base and boost trading of its shares paid off with an 86% boost to its stock price. The group's decision resulted in increased trading of the company’s shares.
While Mubadala’s stake in First Abu Dhabi Bank was affected by a 3.2% fall in stock value, this was counteracted to some extent by 9.6% growth in the value of Abu Dhabi Commercial Bank. Its Aldar Properties stake was also supported by 8.8% stock price growth.
The Qatar Investment Authority (QIA) benefitted from a 37% growth in the value of the Qatar Islamic Bank’s stock, following 14% growth in net profit over H1 and the generally buoyant mood due to rising gas prices and the FIFA World Cup at the end of the year. Ahli Bank also saw positive stock performance with its ticker up 12.4% y-t-d.
The Kuwait Investment Authority (KIA) saw more modest performance in its domestic stocks. The Kuwait Finance House (KFH) witnessed strong 12.4% growth, but telecoms company Zain’s stock this week is more or less the same as at the start of the year and Warba Bank’s value has slumped 15.7%.
The Investment Corporation of Dubai (ICD) was negatively affected by a 5.2% fall in the stock of Emirates NBD, but Emaar Properties was up 21.5% and Dubai Islamic Bank rose 12.3%. The bank’s growth was also a help to the UAE-wide Emirates Investment Authority (EIA), which otherwise saw poor performance in telecoms stocks with Etisalat falling 24.1% and DU down 11.5%.