MSX seen climbing to 7,447 points by end-2026 as rally gathers momentum

10/02/2026 04:37 AST

The Muscat Stock Exchange (MSX) is expected to extend its rally through 2026, with the benchmark MSX30 index projected to rise nearly 17% by year-end, supported by strong domestic liquidity, improving economic fundamentals, solid earnings growth and attractive valuations, according to U Capital.

The brokerage forecasts the MSX30 index to reach around 7,447 points by December 2026, implying a 16.7% upside from its February 4 closing level. This suggests the Omani equity market could enter a fresh re-rating cycle, despite having already delivered strong gains last year.

"The Omani market appears ripe for further re-rating in 2026, underpinned by improving macroeconomic indicators, buoyant domestic liquidity, solid earnings growth and declining interest rates," U Capital said in its Oman Investment Strategy 2026 report.

It added that Oman is increasingly on the radar of foreign investors across both debt and equity markets, following the country's return to investment-grade status and as the local bourse prepares for a potential upgrade from frontier to emerging market status. Rising momentum in mergers and acquisitions, alongside expected foreign direct investment (FDI), is also boosting investor sentiment.

The MSX started 2026 on a strong note, with the benchmark MSX30 index continuing its upward trajectory. The index surged 2.98% on Monday to close at 6,761.1 points, following a 2.18% gain on Sunday, reflecting robust investor confidence and renewed market momentum since the start of the new year.

Valuations still compelling
U Capital's outlook comes after the MSX delivered a 28% return in 2025. However, the brokerage said the Omani market remains undervalued across multiple valuation metrics relative to regional peers.

According to the report, the MSX30 index currently trades at a forward price-to-earnings (P/E) multiple of 11.8 times, representing a 20.9% discount to the GCC average of 14.9 times. The valuation gap is even wider on a price-to-book (P/B) basis, with the index trading at 1.4 times, around 37.6% below regional peers.

The Omani exchange also offers one of the region's strongest income propositions, with an average dividend yield of 5.5%, significantly higher than the GCC average.

"Importantly, this valuation discount is not accompanied by weaker income characteristics. On the contrary, the MSX30 offers a superior dividend yield of 5.5%, well above the GCC average of 3.3%, making it among the most attractive yields in the region," U Capital said.

Earnings growth to remain broad-based
Corporate earnings on the Muscat Stock Exchange are forecast to grow 8.7% in 2026, supported by expansion across most sectors. U Capital expects ten of the sixteen sectors under its coverage to record profit growth, with the majority likely to achieve double-digit gains.

The banking sector is expected to remain the primary earnings driver, with profits projected to grow 12.8%, supported by credit expansion and improving cost-to-income ratios. Leasing companies are also expected to benefit from rising financing demand, while insurance firms are forecast to report improved profitability on the back of stronger underwriting margins.

However, oil and gas exploration companies may face earnings pressure, with sector profits projected to decline 4.3% amid expectations of lower oil prices, which U Capital estimates will average around $60 per barrel. In contrast, gas marketing companies are expected to benefit from rising construction activity and expanding pipeline infrastructure, which could support higher volumes and margins.

U Capital expects Oman's economic environment to remain supportive of capital markets, forecasting GDP growth of 3.5% in 2026, driven largely by continued expansion in the non-hydrocarbon sector, which now accounts for around 70% of economic activity.

The improving macroeconomic backdrop, combined with Oman's restored investment-grade sovereign rating, is strengthening foreign investor confidence in both equity and debt markets, the report said.

However, the brokerage noted that Oman's equity market remains relatively under-penetrated, with its market capitalisation-to-GDP ratio at about 65%, well below the GCC weighted average of 154%. Any gradual convergence with regional capital market depth could significantly expand the MSX's market size over time, it added.

IPO cycle a key structural catalyst
Beyond cyclical growth drivers, the report highlighted structural reforms as a major long-term catalyst for the MSX. U Capital said the exchange is poised to benefit from a stronger IPO pipeline, with 30 companies targeted for divestment - either through strategic placements or public listings - by 2030.

"This anticipated expansion of the listed universe is expected to materially enhance market depth and breadth, improve liquidity conditions, and significantly increase free float and investable market capitalisation," the report said. A larger and more diversified issuer base is also expected to support higher trading volumes, stimulate institutional and foreign investor participation, and strengthen price discovery.

U Capital added that a sustained IPO cycle would be a key structural catalyst for the MSX, supporting higher market turnover and investability, alongside a gradual re-rating as liquidity and investability metrics converge with regional peers.

The brokerage also said a potential upgrade of the MSX from frontier to emerging market status by global index providers such as MSCI and FTSE would be a key milestone for Oman's capital market. Such an upgrade, combined with a strengthening IPO pipeline and rising merger and acquisition activity, is expected to support higher trading volumes and further improve price discovery across the exchange.

"With strong macroeconomic stability, improving liquidity conditions and expanding investment opportunities, the Omani equity market appears well positioned to enter its next growth cycle," the report added.