Global Investment House – Kuwait– Economic and Strategic Outlook –Oman

Published April 28th, 2008 - 12:22 GMT

Global Investment House – Kuwait–  Economic and Strategic Outlook –Oman -  Stock Market Performance- The Omani benchmark, MSM 30 index achieved the best performance amongst all the regional GCC indices for the second successive year. It closed the year 2007 higher by 62% in addition to the fact that it was the only Gulf Index, which did not retract during 2006. It registered a y-o-y growth of 62% up from 5,581.6 points in 2006 to 9,035.5 points in 2007.

Sectoral Performance :
Index 2004 2005 2006 2007 1Q08 Y-o-Y Growth 2007 (%) YTD growth 1Q08 (%)
Banking Sector 4,520.60 6,847.70 7,179.30 12,312.80 14,071.20 72% 14.30%
Industry Sector 2,811.90 3,778.50 5,072.80 8,137.10 9,540.90 60% 17.30%
Services Sector 1,520.50 1,975.70 2,323.90 3,533.10 4,215.20 52% 19.30%
MSM 30 3,375.10 4,875.10 5,581.60 9,035.50 10,102.60 62% 11.80%
Source : MSM

This remarkable increase covered all sectors of the market, as indices went up by different rates. Banking and Investment index took the top spot as the biggest gainer to close the year at 12,312.80 points with an increase of 71.5%. It was followed by Industry, index closed at 8,137.06 points. Services and Insurance advanced by 52.0% to close at 3,533.17 at the end of Dec-07.

The volume of shares traded reached 3,422m shares in 2007 as compared to 1,113m shares reported in 2006 due to increased trading in banking stocks. In addition, value of shares traded increased by 136% in 2007 to reach RO2,626mn.

This impressive performance of Muscat Securities Market during 2007 is attributable to several direct and indirect factors:-

• Remarkable improvement in the performance of the Omani economy buoyed by rising oil prices, which had positive effect on non-oil productive sectors and rocketing oil prices in world markets.
• Increased investor’s confidence in the market due to the efforts of MSM and CMA in the areas of disclosure, surveillance and awareness.
• Encouraging financial results of listed companies as reflected in the positive annual results of previous years.

MSM Historical Performance Snapshot:
Secondary market activity:- 2002 2003 2004 2005 2006 2007
Value of Trading (RO mn) 231 593 759 1,407.00 1,113.00 2,626.40
Number of shares traded (mn) 191.8 315.2 345.4 515.4 1,110.90 3,422.20
Average value of trading per day (RO) 0.9 2.4 3.1 5.5 5.4 11.2
Market capitalization (RO mn) 1,984.00 2,790.00 3,587.00 5,878.00 6,220.00 10,273.00
General Share Price Index 1919 2727 3,375.10 4,875.10 5,581.60 9,035.50
source : MSM statistics and Global research

In terms of value, Banking and investment sector comprised of 58% of the overall index market capitalization, Services were 30% of the pie and Manufacturing and allied activities sector contributed to the remaining 12%.

Profitability of banks & investment companies increased by 64% reaching ROm312.4mn in 2007 from RO191mn recorded in 2006, whereas for industries it increased by 39.8% reaching RO115.5mn in 2007 from RO82.6mn in 2006 and the Services sector registered a y-o-y growth of 40.3% reaching RO208.5mn in 2007 from RO148.6mn during the previous year.

In order to keep pace with the developments in the international financial markets, and to conform with the provisions of Capital Market Law, Muscat Securities Market embarked on a comprehensive review of the laws, systems and instructions in order to serve investors and guarantee fair trading between securities dealers.

The reforms include:
• Updating trading instructions regulation.
• Amending the rules governing the sale of securities in public auctions.
• Approving Internet trading rules.
• Preparing and approving the rules and measures governing settlements guarantee funds in order to cope with the technological developments including linking financial settlements with the Central Bank of Oman and
• Cooperating with the Capital Market Authority for amending some provisions of the Capital Market Law.

The transparency of the capital markets has attracted higher foreign participation in the Muscat Securities Market in 2007. The percentage of participation went up to 27.6% as at Dec-07 as against 23.3% in 2006. Gulf and foreign investors’ participation rose to around 15.9% and 11.6% respectively in 2007 compared with 13.5% and 9.8% at the end of 2006. The Muscat securities market also evoked interest from other gulf countries in addition to the foreign investors.

The new capital formation activity also saw a brisk activity in 2007. The number of issues in the primary market was up 13.1%, from 61 in 2006 to reach 69 by end of Dec 2007. In terms of value, they reached from RO377.0mn in 2006 to RO464.3mn in 2007 representing a y-o-y increase of 23.1%.

Notable deals during 2007 were as follows:

• IPO of Bank Sohar amounting to RO50mn in Mar 2007
• Galfar Engineering & Constructing initial offering in Oct 2007 for RO25mn
• The major rights issues were made by Omani Qatari Telecommunications and Octal Holding & Partners Co. amounting to RO10.8mn and RO32.2mn respectively.
• Other major rights issues that were made by Oman United Insurance, Global Financial Inv., Gulf Investment Services and Oman Orix Leasing amounting to RO1.9mn, RO2mn, RO2.9mn and RO4.3mn
• Private placements also increased the capital formation in 2007. There were four major private placements by Oman Aviation Services (RO36.7mn), Bank Muscat (RO16.2mn), Alliance Housing Bank (RO11.3mn) and Al Jazeera Steel Product Company (RO6.4mn).

MSM-30 index closed at 10,102.6 points as at the end of Mar-08 representing a year to date growth of 11.8%. This was the highest growth registered amongst the markets in the GCC region during the same period. In 2008, the index is expected to continue its rally on the back of increased investor confidence on the performance of the listed entities and the transparency in the market.

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