Monthly Market Review Report-Dec 2016 GBCM Research 2016
Monthly Market Review Report-Dec 2016
GBCM Research 2016 ended on a positive note…
January 9, 2017
Index Performance MSM30 Index Financial Index Industrial Index Services Index
Shariah Index
End Dec 16
End Nov 16
MTD (%)
YTD (%)
5,782.7
5,487.7
5.4%
7.0%
7,671.9
7,202.6
6.5%
18.4%
7,407.3
7,183.1
3.1%
9.4%
3,058.8
2,991.4
2.3%
0.1%
869.0
843.9
3.0%
1.6%
We saw one of the sharpest recoveries in the GCC markets during Dec with the local MSM Index gaining 5.4%. This was on the back of positive sentiments post OPEC deal to cut production by 1.2 million barrels per day (mbpd), which was followed by non OPEC to cut 0.8 mbpd. In addition, we saw investor buying in Index heavyweights along with prevailing higher dividend yield stories ahead of the New Year boosted the Index. For 2016 the Index closed with a gain of 7.0%, second best performing market in the region. The sub indices Financial, Industrial and Services closed the month up by 6.5%, 3.1% and 2.3% respectively. For Dec 2016, Qatar has emerged as star performer with the region gaining 6.6% followed by Abu Dhabi, Oman, Dubai, Kuwait, Saudi and Bahrain which also closed in the positive territory. For FY
MSM 30 Index- Dec 2016
2016 Dubai closed with a gain of 12.1%, followed by Oman (7%), ADX (5.6%), Saudi (4.3%) and Kuwait (2.4%). Qatar and Bahrain closed almost flat. Brent closed the year with a gain of c. 59%.
5,800 5,750 5,700
Market activity for Dec 2016: Overall traded volumes for the month stood at 285 million, while the
5,650
total market turnover stood at RO 62.8 million, as against the previous month turnover of RO 79.8 million. Average daily MSM turnover for Dec 2016 increased to RO 3.1 million as compared RO 4.0
5,600
million in previous month. On the participation front, Omani and Foreign investors remained as net 12/29/2016
12/27/2016
12/25/2016
12/23/2016
12/21/2016
12/19/2016
12/17/2016
12/15/2016
12/13/2016
12/11/2016
12/9/2016
12/7/2016
12/5/2016
12/3/2016
12/1/2016
5,550
buyers to an extent of RO 1.253 million and 541k for the month. GCC investors continued to remain as net sellers to an extent of RO 1.656 million.
Jan 2017 Outlook-Momentum to continue due to new allocations & higher dividend yield MSM Trading – Monthly Turnover – RO 62.849 million (USD 162.8 million) Fig. In RO Omanis GCC Arabs Others Source: MSM, GBCM Research 1|P a g e
At the end of Nov 2016 the deal between the OPEC and Non OPEC members to cut production by 1.8 MBPD starting Jan 2017 is set to rebalance the demand/ supply due to which the oil prices (Brent) surged above $55/bbl. In addition, both the Saudi and Kuwait has announced that they may
Buy
Sell
Net Buy / (Sell)
48,833,353
47,580,267
1,253,086
5,675,143
7,330,799
(1,655,656)
going forward. We anticipate OPEC & Non OPEC deal to boost investor sentiments in the regional
547,442
685,644
(138,202)
markets moving ahead. We do expect the investors to eye for higher dividend yielding stocks along
7,793,345
7,252,573
540,772
go for additional cuts apart from the proposed in the OPEC deal which may keep the oil prices higher
with the new allocations to sustain the overall positive momentum during Q1 2017. End Dec 2016, MSM30 Index is trading at PE (Ann.) of 10.3X, PBV of 1.2X and Div. Yield at 5.2%.
Monthly Market Review Report-Dec 2016
GBCM Research
Volume Leaders for the Month
Gainers for the Month
18.0%
50,000
16.0%
45,000
14.0%
15.5%
40,000
11.8%
12.0%
35,000
10.2%
18.0%
16.5%
16.0% 14.0%
12.4%
12.0%
11.8%
30,000
10.0%
25,000
6.9%
8.0%
5.6%
6.0%
20,000 15,000
2.0%
5,000
2.0%
0
0.0%
Bank Muscat
Al Anwar Holding
Al Batinah Dev. Inv.
Bank Sohar
Value Leaders for the Month
Bank Muscat
Al Jazeera Steel
Losers for the Month
25.0%
14,000 20.7%
12,000
20.0%
0.0% -5.0% -6.6%
-10.0% 10,000
15.0%
8,000
10.0%
8.5%
6,000 8.2% 5.5%
4,000
5.0%
0.0%
Ooredoo
Hsbc Bank
-15.0%
2|P a g e
-10.9%
Fincorp
Sohar Power
-20.0% -25.0%
Al Anwar Holding
Omantel
-35.0%
2,000
-40.0%
0
-45.0%
-42.0% National Securities
Source: MSM, GBCM Research Source: MSM, GBCM Research
-11.5%
-4.3%
-30.0% 5.9%
Bank Muscat
Almaha Petro
6.0% 4.0%
Bank Nizwa
Oman & Emi Inv. Hol
8.0%
10,000
Hsbc Bank
10.8%
10.0%
4.0%
0.0%
10.8%
Oman Edu. & Trin. Inv.
National Gas
Monthly Market Review Report-Dec 2016
GBCM Research
Markets Performance - Heat Map GCC Markets
Commodities Performance - Heat Map MTD (%)
YTD (%)
Oman
5.4%
7.0%
Saudi
3.0%
4.3%
UAE (DFM)
5.1%
12.1%
UAE (ADX)
5.5%
5.6%
Kuwait
3.5%
2.4%
Qatar
6.6%
0.1%
Bahrain
3.9%
0.4%
Source: Bloomberg, GBCM Research
Global Markets
%YTD
S&P 500
1.8
9.5
Dow Jones
3.3
13.4
Nasdaq
1.1
7.5
Brazil
-2.7
38.9
FTSE 100
5.3
14.4
CAC 40
6.2
4.9
DAX
7.9
6.9
Nikkei
4.4
0.4
Hang Seng
-3.5
0.4
Sensex
-0.1
1.9
Shanghai
-4.5
-12.3
Korea
2.2
3.3
Russia
12.0
52.2
3|P a g e
%MTD
%YTD
NYMEX Crude
6.7
46%
ICE Brent Crude
8.2
54%
Crude Oil, Oman
21.5
76%
NYMEX Natural Gas
10.9
59%
12
33%
NYMEX Gasoline Source: Bloomberg, GBCM Research
%MTD
Source: Bloomberg, GBCM Research
Index
Precious/ Base Metals
%MTD
%YTD
Gold Spot Silver Spot Platinum Spot Palladium Spot LME Aluminium-Spot LME Copper-Spot LME Zinc-Spot LME Lead-Spot LME Nickel-Spot US - Hot Roll Coil Steel Corn - Active Contract Wheat - Active Contract CBOT - Soya bean
-1.8
8.6
-3.7 -1.0 -11.6 -1.6 -5.0 -4.8 -14.9 -11.0 -0.3 1.0 1.3 -3.6
14.9 1.2 21.3 13.6 17.4 60.6 11.3 13.5 51.1 -10.4 -21.4 12.6
Source: Bloomberg, GBCM Research
Monthly Market Review Report-Dec 2016
GBCM Research
2016 – A Year of Uncertainty Index
Closing
%YTD (in $ terms)
S&P 500
2,238.80
9.5
Dow Jones
19,762.60
13.4
Nasdaq
5,383.10
7.5
Brazil
60,227.30
69.1
Global Equities:
Americas
Europe FTSE 100
7,142.80
-14.1
CAC 40
4,862.30
1.8
DAX
11,481.10
3.3
The year began with the news on China hard landing which resulted in steep sell off in Equities and Commodities.
This was followed by Brexit in June 2016 which further took toll in the global equities and commodities.
However there was a broader market rally during the latter part of the year.
At the end of the Q4 US markets jumped as President-elect Trump announced to cut taxes, reduce regulations and boost infrastructure spending.
Overall the Developed markets closed on a positive note despite turmoil’s while the Emerging markets closed on a mixed note.
Asia Pacific Nikkei
19,114.40
3.8
Hang Seng
22,000.60
0.3
Sensex
26,626.50
-0.8
Shanghai
3,103.60
-18.0
Korea
2,026.50
0.9
Russia
1,152.30
52.2
Source: Bloomberg
4|P a g e
Monthly Market Review Report-Dec 2016
Index
GBCM Research
Closing
%YTD (in $ terms)
Regional Equities:
MENA Egypt
12,344.90
-24.0
Jordan
2,170.30
1.6
Tunis
5,488.80
-3.5
Morocco
24,464.20
26.3
Palestine
530.2
-0.5
78,138.70
-9.9
Turkey
Regional markets especially the GCC region witnessed slew of austerity measures in their respective Budgets at the beginning of 2016.
The steep sell off in Chinese markets resulted in fall in International Oil prices which touched a historical low of below $30/bbl levels. The above two events weighed heavily on the regional markets during the beginning of the year.
The talks on production freeze started in Feb/Mar 2016 provided some relief for the regional stocks.
However it took 9 months to materialise and at the end of Nov 2016 both OPEC and Non OPEC agreed to a production cut of 1.8 million bbl starting Jan 2017.
Regional markets remained volatile till Q3 2016 and witnessed a significant bounce back towards the end of the year.
GCC Oman
5,782.70
7.0
Saudi
7,210.40
4.4
UAE (DFM)
3,530.90
12.0
UAE (Abu Dhabi)
4,546.40
5.5
Kuwait - PI
5,748.10
1.5
380.1
-1.2
Qatar
10,436.80
0.1
Bahrain
1,220.40
0.4
Kuwait - Wtd
Source: Bloomberg
5|P a g e
Monthly Market Review Report-Dec 2016
Commodities
GBCM Research
Closing
%YTD
NYMEX Crude
53.7
46%
ICE Brent Crude
56.8
54%
Crude Oil, Oman
54.8
76%
NYMEX Natural Gas
3.7
59%
167.1
NYMEX Gasoline Gold Spot
1,152.30
33% 8.6
Silver Spot
15.9
14.9
Platinum Spot
903.5
1.2
Palladium Spot
683.3
21.3
LME Aluminium-Spot
1,704.00
13.6
LME Copper-Spot
5,523.00
17.4
LME Zinc-Spot
2,557.80
60.6
LME Lead-Spot
1,999.50
11.3
LME Nickel-Spot
9,964.00
13.5
US - Hot Roll Coil Steel
633
51.1
Corn - Active Contract
352
-10.4
Wheat - Active Contract
408
-21.4
1,004.00
12.6
CBOT - Soya bean Source: Bloomberg
6|P a g e
Commodities:
After a major sell off in 2015, the commodities witnessed further decline at the beginning of 2016 on the news of China hard landing
However the commodities witnessed a bounce back as the market witnessed rebalancing in demand/supply.
Surge in US GDP and anticipated more rate hikes by US Fed in 2017 strengthened the USD.
The strengthening of USD during Q4 2016 resulted in erasing of partial gains made during the year by especially precious metals.
Brent and NYMEX crude closed the year by surging by 54% and 46% respectively.
Monthly Market Review Report-Dec 2016
GBCM Research
Outlook 2017: Green Shoots Ahead... Global Markets: The global markets especially the developed ones ended the year on a positive note, despite events such as Chinese crisis, Brexit and surprise US elections outcome. However going forward with the announcement from the US President elect- Donald Trump to cut taxes, to bring back outsourced jobs to US and to invest $ 1 trillion towards infrastructure are set boost the US economy and the respective markets as well. While the growth from EU and Japanese economies are likely to remain sluggish in 2017. As per IMF, Global economy is projected to grow by 3.4% in 2017 as compared to 3.1% in 2016. While on the flip side, the following black swan events such as Protectionism by the Trump Administration, Chinese housing market bubble, Brexit (article 50 procedures), NATO Vs Russia, Syrian crisis and the upcoming European elections and a weak banking system in Europe could pose challenges in 2017.
Commodities: As per the World bank, Oil prices are expected to average $55/bbl, next year, higher than the $53/bbl forecast in July, reflecting OPEC’s intention to limit output. Upside risks to the oil price forecast include further supply disruptions among key producers and stronger-than-expected OPEC production cuts. Non-energy commodity prices are expected to rise 2% in 2017 after a 3% drop the previous year. Metals prices are forecast to rise 4% in 2017 after a 9% slide in 2016. Zinc, lead, and tin prices are projected to increase due to tightening supplies. Downside price risks for metals include a further slowdown of growth in China and higher than-expected production, while upside risks relate to government-directed supply restraint in Asia and reluctance by producers to activate idle capacity as demand picks up. Precious metals prices are projected to decline in 2017 as benchmark interest rates rise and safehaven buying ebbs. Although, on average, the Agricultural Price Index is expected to remain broadly stable in 2017, the outlooks for its components vary depending on supply conditions.
Regional markets: The adage “This Shall to pass” which means any negative events are temporary fits the current scenario on oil. When Oil prices started to fall in 2014 and touched a historical low in 2016, the Industry expert’s anticipated a prolonged low oil price scenario to continue beyond 2020. At the end of Nov 2016 the deal between the OPEC and Non OPEC members to cut production by 1.8 MBPD starting Jan 2017 which is set to rebalance the demand/ supply, thwarted those projections and proved that the low oil prices were a temporary phenomenon as the oil prices leaped above $50/bbl at the end of 2016. In addition, both the Saudi and Kuwait Government has announced that they may go for additional cuts apart from the proposed in the OPEC deal which may push oil prices higher going forward. 7|P a g e
Monthly Market Review Report-Dec 2016
GBCM Research
Consensus estimates expects if the OPEC and Non OPEC members stick to the deal of 1.8 MBPD cut, oil prices could trade between $55-$60 in 2017. The green shoots of recovery are thus becoming apparent on the back of bounce back in the oil prices, which is set to revive the GCC economies in 2017. However there would be some lag impact of 6-9 months, as the same to get reflected in the economy. While on the flip side the GCC governments will continue to announce the fiscal consolidation measures such as removal of subsidies, moderate public investments and wage cuts in order to reduce the deficits which may hurt growth rates in the short to medium term.
| Institutional Sales - Hunaina Banatwala, (+968) 2235 0717 |Institutional Brokerage - Talal Al Balushi, (+968) 2235 0725| | Equity Research - Kanaga Sundar, (+968) 2235 0727| Vijay Sridharan, (+968) 2235 0728|
Disclaimer: This document has been prepared and issued by GULF BAADER CAPITAL MARKETS SAOC ("the Company") on the basis of publicly available information, internally developed data and other sources believed to be reliable. While all care has been taken to ensure that the facts stated are accurate and the opinions given are reasonable, neither GULF BAADER CAPITAL MARKETS SAOC nor any employee shall be in anyway responsible for the contents of this report. The Company may have a position and may perform buying/selling for itself or its clients in any security mentioned in this report. This is not an offer to buy or sell the investments referred therein.
8|P a g e
GBCM Research 2016 ended on a positive note…
January 9, 2017
Index Performance MSM30 Index Financial Index Industrial Index Services Index
Shariah Index
End Dec 16
End Nov 16
MTD (%)
YTD (%)
5,782.7
5,487.7
5.4%
7.0%
7,671.9
7,202.6
6.5%
18.4%
7,407.3
7,183.1
3.1%
9.4%
3,058.8
2,991.4
2.3%
0.1%
869.0
843.9
3.0%
1.6%
We saw one of the sharpest recoveries in the GCC markets during Dec with the local MSM Index gaining 5.4%. This was on the back of positive sentiments post OPEC deal to cut production by 1.2 million barrels per day (mbpd), which was followed by non OPEC to cut 0.8 mbpd. In addition, we saw investor buying in Index heavyweights along with prevailing higher dividend yield stories ahead of the New Year boosted the Index. For 2016 the Index closed with a gain of 7.0%, second best performing market in the region. The sub indices Financial, Industrial and Services closed the month up by 6.5%, 3.1% and 2.3% respectively. For Dec 2016, Qatar has emerged as star performer with the region gaining 6.6% followed by Abu Dhabi, Oman, Dubai, Kuwait, Saudi and Bahrain which also closed in the positive territory. For FY
MSM 30 Index- Dec 2016
2016 Dubai closed with a gain of 12.1%, followed by Oman (7%), ADX (5.6%), Saudi (4.3%) and Kuwait (2.4%). Qatar and Bahrain closed almost flat. Brent closed the year with a gain of c. 59%.
5,800 5,750 5,700
Market activity for Dec 2016: Overall traded volumes for the month stood at 285 million, while the
5,650
total market turnover stood at RO 62.8 million, as against the previous month turnover of RO 79.8 million. Average daily MSM turnover for Dec 2016 increased to RO 3.1 million as compared RO 4.0
5,600
million in previous month. On the participation front, Omani and Foreign investors remained as net 12/29/2016
12/27/2016
12/25/2016
12/23/2016
12/21/2016
12/19/2016
12/17/2016
12/15/2016
12/13/2016
12/11/2016
12/9/2016
12/7/2016
12/5/2016
12/3/2016
12/1/2016
5,550
buyers to an extent of RO 1.253 million and 541k for the month. GCC investors continued to remain as net sellers to an extent of RO 1.656 million.
Jan 2017 Outlook-Momentum to continue due to new allocations & higher dividend yield MSM Trading – Monthly Turnover – RO 62.849 million (USD 162.8 million) Fig. In RO Omanis GCC Arabs Others Source: MSM, GBCM Research 1|P a g e
At the end of Nov 2016 the deal between the OPEC and Non OPEC members to cut production by 1.8 MBPD starting Jan 2017 is set to rebalance the demand/ supply due to which the oil prices (Brent) surged above $55/bbl. In addition, both the Saudi and Kuwait has announced that they may
Buy
Sell
Net Buy / (Sell)
48,833,353
47,580,267
1,253,086
5,675,143
7,330,799
(1,655,656)
going forward. We anticipate OPEC & Non OPEC deal to boost investor sentiments in the regional
547,442
685,644
(138,202)
markets moving ahead. We do expect the investors to eye for higher dividend yielding stocks along
7,793,345
7,252,573
540,772
go for additional cuts apart from the proposed in the OPEC deal which may keep the oil prices higher
with the new allocations to sustain the overall positive momentum during Q1 2017. End Dec 2016, MSM30 Index is trading at PE (Ann.) of 10.3X, PBV of 1.2X and Div. Yield at 5.2%.
Monthly Market Review Report-Dec 2016
GBCM Research
Volume Leaders for the Month
Gainers for the Month
18.0%
50,000
16.0%
45,000
14.0%
15.5%
40,000
11.8%
12.0%
35,000
10.2%
18.0%
16.5%
16.0% 14.0%
12.4%
12.0%
11.8%
30,000
10.0%
25,000
6.9%
8.0%
5.6%
6.0%
20,000 15,000
2.0%
5,000
2.0%
0
0.0%
Bank Muscat
Al Anwar Holding
Al Batinah Dev. Inv.
Bank Sohar
Value Leaders for the Month
Bank Muscat
Al Jazeera Steel
Losers for the Month
25.0%
14,000 20.7%
12,000
20.0%
0.0% -5.0% -6.6%
-10.0% 10,000
15.0%
8,000
10.0%
8.5%
6,000 8.2% 5.5%
4,000
5.0%
0.0%
Ooredoo
Hsbc Bank
-15.0%
2|P a g e
-10.9%
Fincorp
Sohar Power
-20.0% -25.0%
Al Anwar Holding
Omantel
-35.0%
2,000
-40.0%
0
-45.0%
-42.0% National Securities
Source: MSM, GBCM Research Source: MSM, GBCM Research
-11.5%
-4.3%
-30.0% 5.9%
Bank Muscat
Almaha Petro
6.0% 4.0%
Bank Nizwa
Oman & Emi Inv. Hol
8.0%
10,000
Hsbc Bank
10.8%
10.0%
4.0%
0.0%
10.8%
Oman Edu. & Trin. Inv.
National Gas
Monthly Market Review Report-Dec 2016
GBCM Research
Markets Performance - Heat Map GCC Markets
Commodities Performance - Heat Map MTD (%)
YTD (%)
Oman
5.4%
7.0%
Saudi
3.0%
4.3%
UAE (DFM)
5.1%
12.1%
UAE (ADX)
5.5%
5.6%
Kuwait
3.5%
2.4%
Qatar
6.6%
0.1%
Bahrain
3.9%
0.4%
Source: Bloomberg, GBCM Research
Global Markets
%YTD
S&P 500
1.8
9.5
Dow Jones
3.3
13.4
Nasdaq
1.1
7.5
Brazil
-2.7
38.9
FTSE 100
5.3
14.4
CAC 40
6.2
4.9
DAX
7.9
6.9
Nikkei
4.4
0.4
Hang Seng
-3.5
0.4
Sensex
-0.1
1.9
Shanghai
-4.5
-12.3
Korea
2.2
3.3
Russia
12.0
52.2
3|P a g e
%MTD
%YTD
NYMEX Crude
6.7
46%
ICE Brent Crude
8.2
54%
Crude Oil, Oman
21.5
76%
NYMEX Natural Gas
10.9
59%
12
33%
NYMEX Gasoline Source: Bloomberg, GBCM Research
%MTD
Source: Bloomberg, GBCM Research
Index
Precious/ Base Metals
%MTD
%YTD
Gold Spot Silver Spot Platinum Spot Palladium Spot LME Aluminium-Spot LME Copper-Spot LME Zinc-Spot LME Lead-Spot LME Nickel-Spot US - Hot Roll Coil Steel Corn - Active Contract Wheat - Active Contract CBOT - Soya bean
-1.8
8.6
-3.7 -1.0 -11.6 -1.6 -5.0 -4.8 -14.9 -11.0 -0.3 1.0 1.3 -3.6
14.9 1.2 21.3 13.6 17.4 60.6 11.3 13.5 51.1 -10.4 -21.4 12.6
Source: Bloomberg, GBCM Research
Monthly Market Review Report-Dec 2016
GBCM Research
2016 – A Year of Uncertainty Index
Closing
%YTD (in $ terms)
S&P 500
2,238.80
9.5
Dow Jones
19,762.60
13.4
Nasdaq
5,383.10
7.5
Brazil
60,227.30
69.1
Global Equities:
Americas
Europe FTSE 100
7,142.80
-14.1
CAC 40
4,862.30
1.8
DAX
11,481.10
3.3
The year began with the news on China hard landing which resulted in steep sell off in Equities and Commodities.
This was followed by Brexit in June 2016 which further took toll in the global equities and commodities.
However there was a broader market rally during the latter part of the year.
At the end of the Q4 US markets jumped as President-elect Trump announced to cut taxes, reduce regulations and boost infrastructure spending.
Overall the Developed markets closed on a positive note despite turmoil’s while the Emerging markets closed on a mixed note.
Asia Pacific Nikkei
19,114.40
3.8
Hang Seng
22,000.60
0.3
Sensex
26,626.50
-0.8
Shanghai
3,103.60
-18.0
Korea
2,026.50
0.9
Russia
1,152.30
52.2
Source: Bloomberg
4|P a g e
Monthly Market Review Report-Dec 2016
Index
GBCM Research
Closing
%YTD (in $ terms)
Regional Equities:
MENA Egypt
12,344.90
-24.0
Jordan
2,170.30
1.6
Tunis
5,488.80
-3.5
Morocco
24,464.20
26.3
Palestine
530.2
-0.5
78,138.70
-9.9
Turkey
Regional markets especially the GCC region witnessed slew of austerity measures in their respective Budgets at the beginning of 2016.
The steep sell off in Chinese markets resulted in fall in International Oil prices which touched a historical low of below $30/bbl levels. The above two events weighed heavily on the regional markets during the beginning of the year.
The talks on production freeze started in Feb/Mar 2016 provided some relief for the regional stocks.
However it took 9 months to materialise and at the end of Nov 2016 both OPEC and Non OPEC agreed to a production cut of 1.8 million bbl starting Jan 2017.
Regional markets remained volatile till Q3 2016 and witnessed a significant bounce back towards the end of the year.
GCC Oman
5,782.70
7.0
Saudi
7,210.40
4.4
UAE (DFM)
3,530.90
12.0
UAE (Abu Dhabi)
4,546.40
5.5
Kuwait - PI
5,748.10
1.5
380.1
-1.2
Qatar
10,436.80
0.1
Bahrain
1,220.40
0.4
Kuwait - Wtd
Source: Bloomberg
5|P a g e
Monthly Market Review Report-Dec 2016
Commodities
GBCM Research
Closing
%YTD
NYMEX Crude
53.7
46%
ICE Brent Crude
56.8
54%
Crude Oil, Oman
54.8
76%
NYMEX Natural Gas
3.7
59%
167.1
NYMEX Gasoline Gold Spot
1,152.30
33% 8.6
Silver Spot
15.9
14.9
Platinum Spot
903.5
1.2
Palladium Spot
683.3
21.3
LME Aluminium-Spot
1,704.00
13.6
LME Copper-Spot
5,523.00
17.4
LME Zinc-Spot
2,557.80
60.6
LME Lead-Spot
1,999.50
11.3
LME Nickel-Spot
9,964.00
13.5
US - Hot Roll Coil Steel
633
51.1
Corn - Active Contract
352
-10.4
Wheat - Active Contract
408
-21.4
1,004.00
12.6
CBOT - Soya bean Source: Bloomberg
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Commodities:
After a major sell off in 2015, the commodities witnessed further decline at the beginning of 2016 on the news of China hard landing
However the commodities witnessed a bounce back as the market witnessed rebalancing in demand/supply.
Surge in US GDP and anticipated more rate hikes by US Fed in 2017 strengthened the USD.
The strengthening of USD during Q4 2016 resulted in erasing of partial gains made during the year by especially precious metals.
Brent and NYMEX crude closed the year by surging by 54% and 46% respectively.
Monthly Market Review Report-Dec 2016
GBCM Research
Outlook 2017: Green Shoots Ahead... Global Markets: The global markets especially the developed ones ended the year on a positive note, despite events such as Chinese crisis, Brexit and surprise US elections outcome. However going forward with the announcement from the US President elect- Donald Trump to cut taxes, to bring back outsourced jobs to US and to invest $ 1 trillion towards infrastructure are set boost the US economy and the respective markets as well. While the growth from EU and Japanese economies are likely to remain sluggish in 2017. As per IMF, Global economy is projected to grow by 3.4% in 2017 as compared to 3.1% in 2016. While on the flip side, the following black swan events such as Protectionism by the Trump Administration, Chinese housing market bubble, Brexit (article 50 procedures), NATO Vs Russia, Syrian crisis and the upcoming European elections and a weak banking system in Europe could pose challenges in 2017.
Commodities: As per the World bank, Oil prices are expected to average $55/bbl, next year, higher than the $53/bbl forecast in July, reflecting OPEC’s intention to limit output. Upside risks to the oil price forecast include further supply disruptions among key producers and stronger-than-expected OPEC production cuts. Non-energy commodity prices are expected to rise 2% in 2017 after a 3% drop the previous year. Metals prices are forecast to rise 4% in 2017 after a 9% slide in 2016. Zinc, lead, and tin prices are projected to increase due to tightening supplies. Downside price risks for metals include a further slowdown of growth in China and higher than-expected production, while upside risks relate to government-directed supply restraint in Asia and reluctance by producers to activate idle capacity as demand picks up. Precious metals prices are projected to decline in 2017 as benchmark interest rates rise and safehaven buying ebbs. Although, on average, the Agricultural Price Index is expected to remain broadly stable in 2017, the outlooks for its components vary depending on supply conditions.
Regional markets: The adage “This Shall to pass” which means any negative events are temporary fits the current scenario on oil. When Oil prices started to fall in 2014 and touched a historical low in 2016, the Industry expert’s anticipated a prolonged low oil price scenario to continue beyond 2020. At the end of Nov 2016 the deal between the OPEC and Non OPEC members to cut production by 1.8 MBPD starting Jan 2017 which is set to rebalance the demand/ supply, thwarted those projections and proved that the low oil prices were a temporary phenomenon as the oil prices leaped above $50/bbl at the end of 2016. In addition, both the Saudi and Kuwait Government has announced that they may go for additional cuts apart from the proposed in the OPEC deal which may push oil prices higher going forward. 7|P a g e
Monthly Market Review Report-Dec 2016
GBCM Research
Consensus estimates expects if the OPEC and Non OPEC members stick to the deal of 1.8 MBPD cut, oil prices could trade between $55-$60 in 2017. The green shoots of recovery are thus becoming apparent on the back of bounce back in the oil prices, which is set to revive the GCC economies in 2017. However there would be some lag impact of 6-9 months, as the same to get reflected in the economy. While on the flip side the GCC governments will continue to announce the fiscal consolidation measures such as removal of subsidies, moderate public investments and wage cuts in order to reduce the deficits which may hurt growth rates in the short to medium term.
| Institutional Sales - Hunaina Banatwala, (+968) 2235 0717 |Institutional Brokerage - Talal Al Balushi, (+968) 2235 0725| | Equity Research - Kanaga Sundar, (+968) 2235 0727| Vijay Sridharan, (+968) 2235 0728|
Disclaimer: This document has been prepared and issued by GULF BAADER CAPITAL MARKETS SAOC ("the Company") on the basis of publicly available information, internally developed data and other sources believed to be reliable. While all care has been taken to ensure that the facts stated are accurate and the opinions given are reasonable, neither GULF BAADER CAPITAL MARKETS SAOC nor any employee shall be in anyway responsible for the contents of this report. The Company may have a position and may perform buying/selling for itself or its clients in any security mentioned in this report. This is not an offer to buy or sell the investments referred therein.
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