MSM survives investor jitters

12/03/2011 00:00 AST

Despite volatility prevailing on the regional bourses following the unrest in parts of the Arab nations, the Muscat Securities Market managed to register substantial rebound during last week. Dividend-oriented activity played a catalyst role in the gains despite foreign institutional pull-out. The bourse continued its winning spree for the third consecutive day on Thursday with the benchmark MSM 30 Index closing at 6,306.55 points. Foreign investors continued as net buyers towards the end of the trading week. The movement of key indicators suggests that the market may undergo sideways consolidation.

On Wednesday, almost all Arab markets registered substantial gains on speculation Opec would consider boosting oil output to compensate for disruptions in Libya. “The situation in the region affected sentiments of investors despite some stocks being attractive,” according to an official with a local brokerage firm, who did not want to be identified. “The market conditions worldwide also affected investor sentiment and the financial results of most companies in the region were not strong to counter the losses,” he says.

Although foreign investors pressed the panic button and went on a selling spree in the market, they later turned the net buyers. The market capitalisation of sixteen Arab bourses was valued at $862 billion on March 4, compared with $1.002 billion on January 25, a day prior to the political crisis in Egypt that triggered unrest across the Middle East, according to a report by the Arab Monetary Fund.

At the same time, the region’s major projects market remained flat at about $2.6 trillion in the seven days up to March 1, with the value of projects planned or under way in the Gulf falling only marginally by 0.1 per cent. Details on page 22 According to regional projects tracker MEED Projects, the unrest in Bahrain and Oman has not yet impacted on the Gulf’s projects index. Both markets recorded small increases in the value of projects planned or under way. Oman’s projects index grew by 0.2 per cent.

FEAR: Investors are confronted with a number of worries. The ‘fear’ fact always takes investors for a ride as emotions play a major role in stock investment. If it is now the fear of unrest in parts of the region behind the topsy-turvy trade on many of the markets, it was the fear of credit contagion in Ireland, Portugal or Greece for the recent fall.

Again, soaring oil prices on the back of unrest, talk of rate hikes from European Central Bank and concern over stubbornly high unemployment in the US are other reasons. Unfortunate is the fact that for most investors they end up losing money because they typically buy when the market is high and sell when the market is low. The fear of losing profit starts growing and more and more people start jumping off the bandwagon and sell shares.

When investing in shares or getting stock market advice, people often forget to think about other investors who are doing exactly the same thing. Nobody can predict the time of crash, but can smell the rat in the contributing factors.

But in crash too, enough money can be made, because, during this period the market moves quicker. For this one needs to have more knowledge, education and experience about the market conditions. But buying a certain per cent at the bottom of the market and sell the same during the top will go a long way to becoming a successful investor.

Oman Daily Observer