It brings me great pleasure, alongside my esteemed colleagues on the Board of Directors, to convene and discuss Coast Investment and Development Company’s annual report for the financial year ending on December 31, 2023.

The year 2023 has been characterized by the highest global interest rates in a generation. These elevated central bank rates, aimed at combating inflation, were exerting downward pressure on economic activity throughout 2023. However, inflation is declining more rapidly than initially anticipated, due to resolving supply-side constraints and the implementation of restrictive monetary policies. As inflation continues to ease, analyst expectation of rate cuts resulted in significant increase in global equity valuations through the end of the year, with many indices closing at or near all-time highs. There remains a risk of inflation resurgence, leading central banks to potentially delay or reduce rate cuts from what was initially anticipated.

Despite facing the highest interest rates in decades and experiencing a banking crisis that led to the collapse of one of Europe’s most renowned banks, Credit Suisse, along with a few smaller ones in the U.S., global stocks have surged by over 20%. At the start of the year, many anticipated a decline in corporate earnings due to the possibility of the U.S. economy entering a recession fueled by high borrowing costs. However, the economy managed to evade a downturn, despite U.S. interest rates reaching a 22-year high. Growth surpassed expectations, with U.S. corporate profits reaching nearly record levels in July-September.

The relief stemming from robust U.S. growth in 2023 helped alleviate concerns regarding China’s recovery and the sluggish pace of the European economy, which hovered near recession by year-end.

In the United States, America’s S&P 500 index, a comprehensive measure of U.S. stocks, surged in 2023 by 24%, reaching an all-time high. The tech-oriented Nasdaq Composite soared approximately 43%, buoyed by the performance of the “Magnificent Seven” – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. Moreover, the Nasdaq 100 index, comprising large tech companies, experienced its most remarkable year since the dotcom bubble, surging by over 54% to close 2023 at a historic peak, primarily fueled by mega tech stocks.

While stock market indices exhibited a remarkable rally, they were somewhat unbalanced. Around 70% of S&P 500 stocks failed the index’s performance throughout the year.

In Europe, markets rebounded strongly after a challenging 2022. Germany’s Dax index climbed by 20%, despite a lackluster performance from Europe’s largest economy, while Italy’s FTSE MIB rallied by nearly 28%.

In Asia, optimism regarding aggressive interest rate reductions anticipated in 2024 propelled Asian stocks to a five-month high by the close of 2023. Additionally, major indices in India surged by approximately 19%, reaching unprecedented levels.

In the Gulf Region, , the performance across GCC countries varied in 2023. The GCC Equity Index gained a modest 3.7%. Dubai and Saudi Arabia stood out as the only two stock markets to achieve double-digit gains, with increases of 21.7% and 14.2%, respectively. The relatively positive performances of Dubai and Saudi Arabia’s equity markets were attributed in part to a robust pipeline of Initial Public Offerings (IPOs). Conversely, the Bahrain and Qatari indices saw more modest gains, recording increases of only 4% and 1.4%, respectively. On the other hand, Oman and Kuwait experienced declines of 7.1% and 6.5%, respectively.

Locally, The Kuwaiti economy wrapped up 2023 with some positive indicators. The last quarter witnessed encouraging developments in bank credit growth, real estate transactions, and stock market performance. Inflation, which had remained relatively stable throughout the year, finally saw a decrease in December after remaining flat for most of the year.

However, the oil sector experienced a setback, with a decline of -3.9% year-on-year in output as Kuwait reduced its crude production in adherence to its voluntary participation in OPEC+ cuts. This decline in the significant oil sector is responsible for the 1.3% year-on-year contraction in overall GDP in the second quarter.

Boursa Kuwait All Share Index closed the year at 6,817 points, a decline of 6.5%. The Premier Market index suffered an even deeper decline of 7.9% representing the weakness of Kuwaiti large cap stocks. Meanwhile the Main 50 index dropped 4.0% during the year. Compared to the double-digit gains elsewhere regionally and internationally, this was a particularly sour year for Kuwaiti equities.

Oil experienced significant volatility throughout the year, with prices being pressured downward by concerns of a global economic downturn while simultaneously being buoyed by worries over geopolitical tensions disrupting supply.

In the spring, the price of Brent crude began to decline towards $70 per barrel, prompting OPEC to reduce output in an effort to tighten the oil market.

Despite having many challenges in Kuwaiti market investments during the year, the company generated net profit of KD 2.64 million, out of which, investments in Associates generated a profit of KD 1.125 million. In light of the quite challenging circumstances in Europe due to the Ukraine war and high inflation in Germany and in Europe, the German investments generated lower profits during the year compared to prior year.

Investments in Kuwait suffered declines mainly due to Kuwait Bourse 6.5% performance drop during the year.

The company is continuing its strategy to diversify its investments through global markets as well as divesting it’s investments in Associates into much higher return opportunities in the global market investments, increase its assets under management and optimize the utilization of financial surpluses as per set business plans. Besides, Coast remains a debt free company without any pending legal liabilities.

On this occasion, I would like to extend my sincere appreciation to the shareholders of the company, the board members and all the staff at Coast for their continued and unwavering support. We remain hopeful that Almighty Allah will continue to bestow more success on Coast in the future.

May Allah protect Kuwait and its people from all evil and may the peace and blessings of Allah be upon you.

Basim Abdullah Al-Othman

Chairman