The year is just about to end, research analysts, fund managers and investors are studying their investments and the market to fully capitalize on the stock movements that will result for their year end performance. Now as most of us believe that the gloomy days are over, companies should post relatively good returns compared to last year; but the question is, how good? This post might interest you if you believe in trend analysis or quants and believe that history does repeat itself. Just for the sake of clarity, I don’t. I like to dig deep in the company’s financials and management to get my answer, then reconfirm it with technicals and other means of analysis. But here it is for those of you who believe in them or just like me want to confirm your view.
This table has a collection of returns from different indices beginning Q1 2003 to Q3 2009. As you might noticed each country had a different trend in their Q4 performance, implying that Q4 is not necessarily the best quarter in terms of return.
Saudi Arabia: Q4 has been the most volatile, meaning that it is either the best or worst performer of the year.
Qatar: Q4 is the least volatile, its either the second best or third best performer.
Kuwait: Q4 is the least favorable, with the performance being the worst or the second to worst.
I know I have been harsh towards our beloved Kuwait SE in my last 2 posts! I’ll explain the details behind this negative outlook in a separate post soon.
UPDATE: A clearer picture of the Kuwait SE returns.
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Loading ...Tags: abu dhabi, dubai, GCC, Historical Returns, Kuwait Qatar, Quarterly Returns, Saudi Arabia
Too much information in the table it’s hard to see. If you high lighted all Q4 then it would be easier to follow.
Last year’s end of year results came shortly after the crisis and by that time the FULL effect of the crisis had not taken place yet. I think the bad results will carry on to this year as well and we’ll only see nice “decent” results by Q2 – Q4 of 2010 INSHAAAALA!
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Saud Reply:
October 7th, 2009 at 4:09 pm
the markets were hit in Q3 and Q4 ‘08, as seen above, and definitely Q4 this year will show better return. But as compared to the other quarters this year, in Kuwait Q4 will not be impressive as the rest.
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Keynesian Reply:
October 7th, 2009 at 4:52 pm
Saud, I second 1001 Nights! U should’ve utilized a highlighter! It can be hazardous on my brain to deal with all these numbers from the early morning!
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Saud, I wasn’t talking about returns in terms of stock price but in terms of income results. I just wanted to emphasize that the repercussions of last year’s all but calamitous financial meltdown will be felt this year as well as last year’s results hadn’t felt the big blow just yet. This is not to say that there would be no improvement but I feel we are far far from seeing what can be described as “good” results. I feel that companies are happy just not to be sinking. Good results seem to be a long shot this year. I really hope I’m wrong. Again, I’m talking net income here, not trading.
(Thank you Kenyesian I appreciate your support. Going crazy-eyed tryin to sift through the data
)
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Keynesian Reply:
October 8th, 2009 at 12:32 am
Everything in finance is relative. I agree with you that earnings wouldn’t be “good” per se. However, relative to last year’s 4Q and this year’s 1Q, I’m sure anything would look spectacular!
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Inshalla inshalla I hope it really does look spectacular. I miss feeling safe at work!
And I do think things are looking better. Today before coming to work I was listening to financial news (international, not Kuwaiti) and (aside from BA which might face a potential strike!) they seemed to all be about sun and roses. Everyone seemed optimistic so I hope there won’t be another big disappointment.
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Abdulmohsen Reply:
October 8th, 2009 at 12:21 pm
I think if you survived last year then you are safe… employer psychology plays in important role when it comes to hiring and firing employees. If everything was rosy then the employer would feel safe and would not have to make huge cutbacks in staff.
I think after Q1 2010 we might not necessarily see any huge increases in net income. I believe the recovery would be slow and consumer confidence takes time to build after it was shattered in the manner it did last year.
Wow… more than a year have passed since Lehman Brothers went bankrupt! Time does fly
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Abdulmohsen, do you think consumer confidence influences non-retail type companies? I think it’s the bank’s confidence that needs to be bolstered. I feel they’re being overly cautious and just piling it on and keeping it safe with them because they’re too freaked out to finance projects. Part of me doesn’t blame them. But part of me is like my GOD just a little cash is needed to do well in this or that field and STILL it’s hard to get to it.
(btw Companies aren’t necessarily safe just because they survived last year, there were plenty of lawsuits filed in 2009 and perhaps late 2008 and the results of some of those lawsuits have not come out yet. Some of these results could really take a stab at the sued companies. I also get the sense that sometimes not enough provisioning is done so the level of risk you take when investing in that company may not necessarily show in the financials.)
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Abdulmohsen Reply:
October 8th, 2009 at 6:02 pm
I think we should look at the big picture… if consumer confidence increased then their risk appetite will increase as well… this means consumers can afford to take more risks when it comes to making decisions. Maybe they can now feel comfortable in buying a house or whatever goods to satisfy their needs and wants. Then slowly, the whole economy would move again and expand. I said it in two sentences, but it could take years to materialize.
If companies had lawsuits filed against them the first thing they should do is to take a provision based on the potential claim size. I think companies are forced to do this. If they won the case then these provisions would go back in as extraordinary gains. This explains why a company’s stock would soar if they got a ‘not guilty’ verdict.
As for bank provisions I’m not sure but I think these provisions are regulated by CBK and any loan defaults should be mirrored in the bank’s financial statements.
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I see what you’re saying in that first paragraph and that totally makes sense.
But about that second paragraph, I don’t know I’m a little untrusting. I know that to meet accounting standards and regulations they must place provisions but what I worry about is that they don’t OR they don’t put sufficient provisions. The auditors are the watchdogs in this process and they ought to enforce this but I wonder about what their real “watchdog power” is when the information given to them is limited? The reason I am skeptical is because accounting is a lot like make-up… Emphasize the eyes this time and the cheeks this other time. Sometimes you haven’t got a clue what the company’s real face looks like!
In other words, if I’m a company and I wanted to smudge the picture, I shouldn’t, but I probably COULD. Willa shraayik?
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Abdulmohsen Reply:
October 8th, 2009 at 8:49 pm
You are absolutely right… It all depends on the company’s ability in playing the ‘accounting shenanigans’ game and the auditor’s ability to find those shenanigans.
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I do agree with Abdulmohsen on the point that it will take time to fully recover as Kuwait is expected to record negative GDP this year of -1.2% and 2.2% in 2010 which is the lowest rate amongst its MENA peers.
1001 nights, the table above shows the return on the index not the quarterly earnings. However, I second you on the point that ‘09 year end results will feel the financial meltdown as it will be dragged down by Q1 and the not so good results of Q2 (on a YoY bases). In addition to that, the KSE index fell 3.3% in Q3 so I don’t expect any improvements in Q3 earnings. (I’ll post something tonight to elaborate on what I’m saying).
Sorry of the first table, I added another one. It should be better
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Thank you Saud, the new table is a lot clearer. But I have to say that the trend is rather ominous. If in the past all Q4’s went below Q3’s then since our Q3 was a -3% what’s our Q4?
Come to think of it, is end Q4 the best time to try to get a deal?
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from what is stated from the study above, Q4 should be less than 3.3%, we’ll experiment this theory soon
I would suggest staying away from kuwait since the valuations are high and buying in other GCC markets like Saudi and Qatar.
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Thanks and i hope the rest of the posts exceed ur expectations
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