23/08/2015 08:41 AST
Local and foreign investors on the Muscat Securities Market (MSM) have lost a whopping OMR520 million in the last twenty-two days following a severe fall in share values as oil prices touched a six year low.
The local bourse plummeted 7.14 per cent or 468 points since the beginning of the month to close at 6,089.87 on Thursday, from as high as 6,558.18 points on July 30.
As a result, the market capitalisation (value of shares of all companies) of listed stocks, excluding bonds, on the bourse dipped by OMR519.55 million — from OMR13.742 billion on July 30 to OMR13.223 billion on Thursday.
The reasons are not far to seek. Crude oil prices in the international market plummeted in the last couple of weeks, significantly impacting the government’s ability to meet development expenditure since 79 per cent of budget revenue comes from hydrocarbon resources.
Oman’s budget deficit for the first half of this year surged to OMR1,918.5 million, against a surplus of OMR250 million for the same period of 2014, mainly due to a plunge in oil prices.
Most of the Middle East markets plummeted last week in the aftermath of plunge in crude oil prices, with panic selling gripping the Saudi bourse. About $50 billion of market capitalisation has been eroded in Saudi Arabia so far this month as investors dumped stocks.
“The GCC markets, including Oman, started falling with oil prices showing a sluggish trend. Regional markets and subsequently global markets started the decline,” Kanaga Sundar, head of research at Gulf Baader Capital Markets, told the Times of Oman.
Foreigners dump shares
“There was an outflow of funds from GCC and Oman markets as well since foreign institutional investors started selling their stakes,” he added.
“Foreign institutional investors were net sellers during the period of market decline,” added S Suresh Kumar, head of research at Al Maha Financial Services.
Most investors are losing confidence, resulting in dumping of shares across the board, and there is hardly any sign of an immediate recovery across the region.
“We are going to see a volatile period in the coming months due to prevailing low oil prices,” said Sundar, adding, “The macro-economic challenges for regional economies will remain, which, in turn, will reflect in the market performance as well.”
Suresh Kumar said that oil price is near its bottom and there could be a growth in demand. Crude oil (WTI), which is at $39.58 a barrel, must have lost approximately 20 per cent since the fall in prices started.
Referring to the soaring budget deficit, Sundar said Oman government would be able to manage deficit with borrowed money and by transferring funds from reserves this year. However, in the long run, the government will have to prioritise expenditure, besides coming up with long-term programme for deficit financing. “Budget for all GCC countries will be critical next year.”
Times of Oman
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