KSE Price Index Performance Review

The performance of the KSE was quite dismal in Q2 of H1 of 2010. The index closed just above (2.37%) the lows of 2009 (6,391.50 on March 1st) at 6,543.20.

Data: Bloomberg; Wealthy Opinions 

Quite a few things have happened so far:

Some of the so called Blue chips have got hammered (Agility); Zain declared hefty dividends - after the sale of African business; all over the world, market have dived down; Crude prices have corrected; Gold has shot up and a lots of other things. 

Q2 performance of KSE Price Index was one of the worst since 1996. So, the question one might ask is "what should we expect in Q3?

Below is the chart highlighting the historical Q3 performance for the index. One can see that the index has been on a mixed ride; but looking at the recent, past third quarter, figures (2008 and 2009) and the current sentiments we might end up with few more red numbers. 

But nothing to worry. As the experts say that "this too will pass".

Data: Bloomberg; Wealthy Opinions

Remember, "You are not investing in the past, but the accumulative cash flow of future" Li-Lu Columbia University. So go out, do a little hard work; hunt for the strong businesses whose intrinsic value is far higher then the current market price. 

OK!! Enough of philosophy and now back to performance analysis.

Closing on Q2 also ended the first half (H1) of 2010. Again, the figures were not satisfactory. Why? Because, of the negative performance.

Since 2000 all H1's closed positive (except 2006) - and not only positive but Exceptionally Positive - but this consistency was broken in the current year as the index closed in negative territory. (refer below the chart).  

Data: Bloomberg; Wealthy Opinions

All these negative sentiments were linked to the moratorium on trading of Zain shares, - my language is getting oily, like to GoM's Oil Spill - but the response didn't change even after the freeze was lifted. 

Though the market is flooded with cash, after the recent dividend distribution, people seems to stay away from bidding for Risky Assets. This has resulted in Kuwait under-performing its peers (GCC) - refer below the graph.

Data: Bloomberg; Wealthy Opinions

At the international level too, we had murky scenes - such as the EU debt problem, China's decision to cool down the economy and Gulf of Mexico's (GoM) Oil Spill - due to which markets all over the world have got hammered/corrected.

The figures/numbers released by US (one of the biggest consumer driven economy) were not upto the mark, raising question on the recovery process and fearing of a double dip or an extremely slow recovery. 

So, what next??

Amid all this, there's room for optimism. Its just that we will have to look hard. Scary news like the current one are best friends with opportunities. May be people are terrified but this correction has presented some good entry points for the long term investors. 

Behaving like herd won't really help. In growing markets investors are invariably drawn to top performing equities. They pile stocks at their peak, ride them down and then repeat the process again and again. That's not how investments are made. "To be a better investor, you have to stand on your own. You just can't copy other people because sooner or later the position might turn against you and you wont know when to exit" Li-Lu Columbia University

Enough, for the time being. 

Happy Investing !!!