Oman’s economic growth brightens MSM outlook

01/01/2011 00:00 AST

The Omani economy has been witnessing an excellent growth mainly thanks to economic liberalisation, diversification initiatives, increased government and private sector spending on infrastructure developments and healthy population growth. Financial deregulation and improvement in technology accompanied by strict regulatory and supervisory norms of the Central Bank of Oman have had a profound impact on the financial landscape of the country.

Construction of new airports in Muscat and Salalah, various other projects including the development of Duqm area and the Royal Decree establishing Sohar Free Zone point to the infrastructure growth in the Sultanate. The benefits of these projects will have positive impact on the corporate sector and its earnings. As regards to the Muscat Securities Market, the year 2010 has been a challenging one. The local bourse managed to maintain investor confidence in consistence with the message of accelerated growth seen from other indicators.

Trading in December saw the MSM30 Index breaching the psychological mark of 6,700 on the back of improved liquidity and positive global cues. On the global market too, investors got down to the final weeks of the year making healthy gains on the back of a fruitful growth profile for the coming year. The local bourse gained 6.04 per cent in the current year against a return of 17 per cent in 2009.

According to Sankar Kailasam, Senior Vice-President of Asset Management, Gulf Baader Capital Markets, higher provisioning, lack of credit growth in the banking sector and topline concerns of the industry sector companies were the reason for the underperformance. The full year MSM30 stocks earning for the current year is expected to end with a growth of about 9.5 per cent. The major casualty for the current year has been the turnover of the market which has declined significantly.

“Lack of foreign interest and risk aversion of the local investors despite cheap source of funds have impacted the market in the current year,” says Sankar. The turnover ratio of the bourse is just in the range of 12 to 13 per cent. The same had been in the region of 23 to 25 per cent and in the peak had touched 46 per cent, according to the research by Gulf Baader Capital Markets.

There was only one listing in the market in the current year as that of Nawras. While it was one of the larger issues in the market the response was just adequate. The local bourse was not the only one affected. The regional markets too faced pressure in terms of attracting fresh money from foreign investors. Qatari market was an exception as government intervention to clean bad assets off the books of the banks and refinancing opportunities for the banks enabled corporate growth, according to Sankar.

According to Sankar, the new year is likely to see better prospects for Omani as well as regional markets with the oil prices, currently hovering at $91/brl, gathering more strength and, in all likelihood, crossing the $100/brl mark. With enhanced production capabilities, Oman may experience a comfortable position in the current year.

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Oman Daily Observer