Monday, 27 December 2010

How Did Kuwait SE Perfrom in 2010? « Alpha Dinar- talking GCC finance


Well there is no one answer to the question above, as it depends on the index you are looking at. By looking at the price index (the most popular index in Kuwait), you will find that the returns for the year, including dividends is a mere 0.2%. But if you look at the weighted index (my preference), you would find that the mark returned a hefty 25.7%, including dividends, beating global markets (US 12.7% , UK 11%, France -2.3%, Germany 16.7%, Japan -1.8%, and Hong Kong 4.4% among others) as well as regional peers (Saudi Arabia 7.5%, Qatar 25.3%, Dubai -11%, and Abu Dhabi -1.8%).
Again the difference between the two indices is that the price index gives smaller companies a bigger weight in the index versus the weighted index, which takes into account the market cap of the company. I also included the MSCI Kuwait, which returned 33.4% so far this year. This index takes into account the stock’s market cap as well as liquidity (i.e. what percentage of the share is free floating and not held by cornerstone investors).
The key lesson here is that this year, the price index was dragged down by small cap companies that have been hit badly by the financial crisis and haven’t recovered yet. If you had invested in blue chip stocks (NBK, KFH, Zain, etc.) would would have been better off.

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