25/10/2016 07:20 AST
A combination of Initial Public Offerings (IPOs), planned disinvestments by the government in state-owned entities, and the listing of Real Estate Investment Trusts (REITs) for the first time in the Sultanate, will help inject much-need liquidity into the Muscat Securities Market (MSM), a top official of the Capital Market Authority (CMA) revealed here yesterday.
Abdullah al Salmi (pictured), Executive President, said the initiatives promise to bolster the bourse’s role in helping listed firms secure funding for their businesses, attract inward investment, and generally support domestic economic growth amid today’s constrained fiscal environment.
Most notable is the Authority’s plan to authorise the introduction of Real Estate Investment Trust (REITs) — a move that is set to meet a long-standing demand of real estate developers and investors in the Sultanate.
“We are ready with the rules and regulations to list REITS,” Al Salmi said, noting that the proposal had recently received a firm thumbs-up at the National Programme for Enhancing Economic Diversification (Tanfeedh) currently underway in the city.
A Real Estate Investment Trust is defined as a security that sells like a stock on exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. Equity REITs invest in and own properties (thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties’ rents.
Speaking at the Outlook Oman forum, organised by MEED Events at Shangri-La’s Barr Al Jissah Resort & Spa yesterday, the Executive President said the Tanfeedh initiative has also mooted a roadmap for the off-loading of government stakes in state-owned companies via public offerings on the MSM. “We expect that the government will garner around RO 2 billion out of the privatisation of these companies, which will help boost market liquidity, as well as activate the secondary market, which is currently subdued,” he said.
Among the government linked entities slated to go public is Minerals Development Oman (MDO), which aims to offer 40 per cent of its equity via an IPO. The balance 60 per cent is owned by four government entities: the State General Reserve Fund (SGRF), Oman Investment Fund (OIF), Oman Oil Company (OOC) and Oman National Investments Development Company (TANMIA). “We hope to see the IPO soon, if not in Q4 of this year, definitely by Q1 of next year,” Al Salmi said.
Also anticipated to float on the stock market as part of the government’s privatisation efforts are Muscat Electricity Distribution Company (MEDC) and Al Ghubra Power and Desalination Co (GPDC), which are wholly owned entities of the Electricity Holding Company (Nama Group).
Joining the expected line-up are local insurance companies which, under newly revamped insurance laws, are required to offer part of their equity via IPOs, said Al Salmi. “Seven insurance firms are not listed yet, and we hope to see them float IPOs next year,” he stated.
Asked by the forum’s moderator, Edmund O’Sullivan, Chairman — MEED Events, about the CMA’s plans to boost the Muscat bourse’s annual turnover, Al Salmi said the market’s capitalisation currently equates to around 30 per cent of the Gross Domestic Product (GDP), which is far below the GCC average of 60 – 65 per cent. The CMA’s goal, he said, is to bolster the MSM’s market cap to the GCC average. Commenting on the CMA’s plan to set up a dedicated market for small and medium enterprises (SMEs), the Executive President said: “It’s an ongoing effort; we have done some work on this front, having signed an MoU with a Taiwanese entity to do the feasibility study. But it’s going a bit slow now because of market conditions. The essence of this project is to help incubate SMEs and guid
Oman Daily Observer
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