MSM takes marginal hit on US downgrade

09/08/2011 00:00 AST

Although share markets across Asia fell sharply yesterday following the downgrade of US debt by Standard & Poor’s, the Muscat Securities Market ended the day with a marginal fall of 0.8 per cent.

Most of the Gulf bourses made some recovery as they appeared to have mostly absorbed the shock of the historic downgrading which sent global markets tumbling.

The local and regional investors ended as net buyers and foreigners were net sellers for the day at the local bourse. While the global sentiments played on the foreign investors mind, the regional investors took advantage of the decline in prices.

According to Sankar Kailasam, Senior Vice-President, Asset Management, Gulf Baader Capital Markets, with valuations of select bank and services companies becoming attractive, value investors merrily picked the shares.

“While the credit offtake has been reasonably good with quality, the banking stock prices have declined between 10 per cent and 20 per cent for the year. This provides an apt situation for the long term and value investors to put in fresh funds into the market for reaping the benefit when the sentiments recover, which according to us is not far from these levels”, he says.

The benchmark MSM30 Index closed the day at 5,604.93 points. The Services Index staged some gains while other sectoral indices continued the downtrend.

But analysts are of the opinion that the S&P downgrading will not have much impact on the regional bourses.

Kailasam says: “The situation provides for good opportunity for the fund managers to reshuffle or rebalance the portfolio to set for a growth path that would exceed the investors expectation”.

The later part of the current month is expected to see improvement in the overall trading activity with the digestion of Q2 corporate earnings and the likely calming down of global market thanks to the intervention of several government agencies including the European Central Bank.

Analysts also say the local equities seem to be interestingly poised for the month and the risk reward ratio is turning positive with the market already pricing in for most of the uncertainties. On the other hand, with the Omani equities already underperformed during the current year, the decline due to global uncertainties could be considered as an accumulation point for the long- to medium-term horizon.

In July, on the Investor participation side, Omani and GCC investors emerged net buyers for the month to an extent of RO 728K and RO 432K respectively, while foreign investors emerged net sellers to an extent of RO 863K.

The volumes touched the lowest levels in the month over the last two years. On a sectoral basis, the financial sector was down by 1.2 per cent for the month. The services sector closed the month with a decline of 1.6 per cent,while the Industry Index closed on a negative note with a decline of 1.6 per cent for the month.

Oman Daily Observer