MSM bounce seen sustainable

11/03/2012 12:22 AST

In line with the positive global sentiment, the Muscat Securities Market too witnessed an impressive turnaround. The benchmark MSM-30 index closed positive for the fifth consecutive week in a row, which is for the first time in the last one year. Turnover saw a surge of 18 per cent in the last week with the market breadth increasing by 10 per cent.

“The huge volume is a clear indication that the bounce is sustainable. More speculative money is coming into the market from holding companies”, says Sankar Kailasam, Senior Vice-President, Gulf Baader Capital Markets. At the same time lack of interest from institutional buyers raises concern. “There has not been much rise in blue chip companies. The market lacks rally in fundamental shares like banking”, he adds.

The same view was expressed by Suresh Kumar, Head of Research at Al Maha Financial Services. “The market lacks lead from catalysts and institutions. Although bellwethers are silent upto some extend, small caps are very active. The banking sector is waiting for positive results from the Islamic banks”, he says. Unlike earlier days, the market witnessed broad-based buying with small cap companies attracting huge buying interest. The increasing foreign participation also can be viewed as a sign of the improving sentiment in the local bourse.

“The positive first quarter results are expected to give further boost to the market”, says Sankar. Industry sector showed a clear outperformance with the broad market as commodity related counters such as cement, steel, and cables etc. showing a smart run up in this year. Performances of these companies are likely to improve based on the favourable demand side, going forward.

The cement sector is in for further growth following removal of regulations in Dubai, which is expected to increase their exports to Saudi Arabia. This will finally stop the dumping by Dubai companies in Oman. Similarly, the steel sector in the Sultanate has been tremendously growing on the back of increased government spending on infrastructure. Analysts believe that this will have big impact on construction companies.

Movements of the investment holding companies can be viewed as a leading indicator of the market movement. The year to date changes of majority of the holding companies are far above the change of the market,. After showing a decline of 50 per cent in the last year, Onic Holdings showed a gain of 47 per cent in this year so far, while Oman and Emirates showed a year to date gain of 33 per cent compared to the loss of 49 per cent, recorded for FY 11.

Majority of these companies still trade below their book values leaving scope for further upside. “With the uncertainties on key factors such as Greece, US economic outlook easing, the global and regional markets clearly show improvements this year. MSM also is likely to continue the uptrend and expected to show a better year backed by the stable economic fundamentals and better corporate performance” says Suresh.

Currently, the Muscat Securities Market is attractively priced compared to other GCC markets and also offers the highest dividend yield in the region. With the revival of the economic scenario and financial markets, globally and regionally, the local bourse is poised for an expansion in valuations in line with the regional markets.

Times of Oman