MSM to recover in line with GCC bourses

With corporate earnings showing signs of healthy growth driven by stable economic outlook in Oman, the Muscat Securities Market is expected to regain positive investor sentiment.

In line with major markets in the GCC, average daily turnover of the local bourse fell by 16.8 per cent in May compared to the first quarter of the year, while average daily volumes registered a 22.3 per cent fall in the same month.

The benchmark MSM 30 Index fell by 4.2 per cent from a high of 6007.71 points reached in April to 5754.69 points at the end of May 2012, reducing the year’s returns from 5.5 per cent to 1 per cent.

The GCC markets are witnessing a domino effect of the volatility in the global financial markets.

“Although this effect is only temporary, it creates a huge mismatch as the underlying fundamental strength of the economy is overshadowed by the global crisis. Hence, contrary to the current investor sentiment represented by the dramatic changes in market dynamics, outlook for GCC markets continues to remain upbeat owing to the positive economic developments”, says a research report prepared by the analysts at Al Maha Financial Services.

Liquidity in the major GCC markets suffered considerably in the last month due to the over-reaction of investors to the global circumstances irrespective of the stable outlook for the GCC markets.

Saudi Arabia, Dubai and Abu Dhabi markets witnessed a notable decline of 32.8 per cent, 55.3 per cent and 20.1 per cent respectively in average daily turnover for the month of May compared to the markets’ corresponding average of the first three months.

“Although the local market experienced a major fall in liquidity and returns in May giving rise to liquidity worries and dampening investor confidence, the hugely oversubscribed public offering of Bank Nizwa and the subsequent listing gains of 16.67 per cent reinforced the investor confidence”, says the report.

The inclusion of two MSM companies, Oman Cement and Oman International Bank (now HSBC Bank Oman) in the MSCI Frontier Index during last month was also reassuring for investor confidence and increasing MSM’s representation on international capital markets.

Businesses too are geared up to remain competitive and maintain their positive future outlook. Besides banks and leasing companies, many other companies like Gulf Mushroom, Transgulf, Dhofar Tourism, etc are raising capital and looking at expansion options. The industrial sector has been outperforming the market, returning 16.7 per cent in the first five months of this year.

Continuous improvement in corporate profitability and favourable business sentiment leave no doubt that GCC's business environment is internationally competitive, ranking above the Euro zone in the World Bank's Doing Business rankings and the WEF Competitiveness rankings in 2012.

A recent survey showed that 67 per cent of the GCC's business leaders are in agreement that things are now much brighter and moving speedily in the right direction versus an average of just 40 per cent of global corporate leaders. This attitude is further strengthened by the data in which as high as 90 per cent are convinced that the GCC economies will grow exponentially in the next 12 months.

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