Oman bourse suffers largest drop in 7 months

26/03/2012 22:47 AST

Bank declines condemned Oman's bourse to its largest one-day loss since August after the central bank said it would reduce the interest rate limit on retail loans.

Heavyweight Bank Muscat dipped 3.2 percent and accounted for a third of all shares traded. Bank Dhofar slipped 3.3 percent and National Bank of Oman fell 3.9 percent.

Muscat's index finished 1.5 percent lower at 5,823 points, trimming 2012 gains to 2.3 percent.

The central bank will reduce the maximum interest rate for bank-issued personal loans to 7 percent from 8 percent from next month.

"Bank Muscat can manage to survive with some liabilities re-pricing to improve margins and also build on volumes to compensate for any lost margin," says Harikumar Varma, assistant vice-president of asset management at Gulf Baader Capital Markets. "Other banks, like Bank Dhofar and Bank Sohar, are small and already have higher funding costs."

Elsewhere, Kuwait's index declined 0.2 percent to 6,209 points to cut its year-to-date gains to 6.8 percent.

Saudi Arabia's bourse sees little reaction from the kingdom's commercial official calling for a halt in margin lending through banks, with the index rising to a fresh three-and-half-year high.

The chairman of Jeddah's Chamber of Commerce, Saleh Kamel, warned of a market collapse following the sharp rally in recent weeks, according to local media reports.

He demanded officials to ban the banks from lending to investors trading shares. Some small-cap stocks have been the target of speculative trading, which pushed stocks like Zain Saudi and Dar Al Arkan up 95.5 percent and 84.8 percent year-to-date, with analysts seeing little fundamental strength backing the move.

"The banks have certain allocation for stocks, but at the same time, banks will give loans and it's up to people which stocks they buy," said Hesham Abo-Jamee, chief executive officer at Bakheet Investment Group.

The benchmark is up 0.2 percent to 7,775 points, its highest level since September 2008 and up for eight session in last nine. The market is up 21.2 percent so far this year.

Reuters