DOHA: The balance sheets of the GCC central banks have been growing steadily over the last few years. Total assets of the GCC central banks grew from $557bn in 2008 to $901bn in September 2013, an impressive growth of 62 percent.
Despite minor setback in 2009 when assets dipped by 4.7 percent, GCC central banks managed to compensate for the drop in 2009 and push their assets to reach $588m in 2010.
The Gulf Investment Corporation (GIC) noted in its monthly report that Qatar and Kuwait opt to hold a significant share of their assets in gold. As for Qatar, the gold stocks is almost three-fold of the gold stock in Kuwait and has been consistently rising since 2008, the GIC report for January 2014 said.
The compositions of the region’s central banks’ assets vary mainly in terms of investments in gold and securities. Bahrain, Kuwait, Oman and Qatar opted to maintain their reserves in gold, whereas, Saudi Arabia and UAE central banks hold a significant share of their assets in investments in foreign securities. Kuwait and Qatar hold the highest reserves in gold. Kuwait’s gold reserves remains fairly stable with slight decreases throughout the last five years, dropping from $115m in 2008 to $111m in 2009 and then rising again to $114m in 2011. Up to September 2013, Kuwait gold reserves stand at $112m.
In terms of investments in foreign securities, the Saudi Arabian Monetary Agency (SAMA) leads the way with a record value of $566bn in October 2013, rising from $285bn in 2009. SAMA’s investments in foreign securities witnessed a significant drop in 2009 of $22bn as a result of the financial crisis.
On the region’s equity market, the report noted the GCC equity markets continued the rally which saw the S&P GCC Composite index growing by 3.38 percent for the month of December 2013. During 2013, the index recorded strong performance of +30.05 percent vs. +7.14 percent the previous year. Performance was dominated by UAE equity markets with both Dubai and Abu Dhabi markets ending with spectacular returns. Kuwait was the worst performer. Despite mute performance during the last few months of 2013, the QE Index is the second best performer in GCC, after UAE, and added 28.44 percent during the year.
On the 2014 outlook, the report said the 2013 annual earnings announcements will likely result in real allocation adjustments and set the tone for expectations in 2014. Markets are likely to re-price stocks at disappointing numbers and allocate more favourable to growing companies. However, preference for dividends remains that investors may provisionally hold on to stocks with higher dividend yields despite falling expectations.