Tech­ni­cal anal­y­sis

Muscat Daily - - BUSINESS -

As we an­tic­i­pated in our pre­vi­ous re­port that the first re­sis­tance level of MSM30 would be at 5,090 points, the in­dex touched the high­est point of this level dur­ing last week.

Based on pos­i­tive tech­ni­cal in­di­ca­tors, it is ex­pected that the mar­ket will con­tinue its pos­i­tive per­for­mance dur­ing the cur­rent week to reach the level of 5,131 points.

Lo­cal news

BankDho­far an­nounced that its board of di­rec­tors ap­proved rais­ing of Core Eq­uity Tier 1 (CET-1) cap­i­tal of an amount up to RO40mn by way of rights is­sue of or­di­nary shares, sub­ject to nec­es­sary reg­u­la­tory ap­provals. The bank’s to­tal cur­rent CET-1 cap­i­tal is RO385.86mn and CET-1 cap­i­tal ra­tio (CET-1 cap­i­tal as a per­cent­age of riskweighted as­sets) is 9.55 per cent. BankDho­far’s Tier 1 cap­i­tal ra­tio is at 12.41 per cent and to­tal cap­i­tal ra­tio is at 14.89 per cent as of June 30, 2017, way above the Cen­tral Bank of Oman’s (CBO) cur­rently stip­u­lated min­i­mum lev­els.

Bank So­har will hold an ex­tra­or­di­nary gen­eral meet­ing on Au­gust 13 to ap­prove the is­suance of ad­di­tional Tier I cap­i­tal in­stru­ments in the form of per­pet­ual bonds through a pri­vate is­sue for a to­tal of RO100mn (a RO70mn + RO30mn as green shoe op­tion) with nom­i­nal value of RO1000 per bond.

Ray­sut Ce­ment an­nounced that it has ap­proved the sale of its en­tire share in Oman Por­tuguese Ce­ment Prod­ucts Co LLC to OPAL De­vel­op­ment Com­pany LLC at a sales price of RO5.5mn. Ray­sut Ce­ment has made a con­sol­i­dated profit of RO1.11mn from this sale which will ap­pear in the fi­nan­cial state­ments for the third quar­ter of 2017.

The sul­tanate has taken a US$3.55bn loan from Chi­nese banks. Oman had orig­i­nally planned to raise US$2bn from the Chi­nese mar­ket but raised the amount be­cause of strong re­sponse.

It would be worth men­tion­ing that Oman has al­ready raised US$7bn from in­ter­na­tional bonds this year – more than the ex­pected bud­get deficit for 2017. It is­sued a triple-tranche US$5bn con­ven­tional bond in March and an US$2bn Sukuk in May. In­ter­na­tional de­mand for both trans­ac­tions was high, with the con­ven­tional bond at­tract­ing more than US$20bn in or­ders and the Sukuk al­most US$7bn.

Oman is also in talks with in­ter­na­tional banks about rais­ing more funds through loan and bonds, ac­cord­ing to a Reuters re­port. The dis­cus­sions are at an early stage and the gov­ern­ment has not is­sued any of­fi­cial re­quest for pro­pos­als.

Moody’s In­vestors Ser­vice down­graded Oman’s long-term is­suer and se­nior un­se­cured bond rat­ings to Baa2 from Baa1 and changed the out­look to neg­a­tive from sta­ble. The neg­a­tive out­look re­flects Moody’s view that de­spite a num­ber of credit strengths the bal­ance of risks to the Baa2 rat­ing are skewed to the down­side.

The key driver for the rat­ing down­grade is that in Moody’s view progress to­wards ad­dress­ing struc­tural vul­ner­a­bil­i­ties has been more lim­ited than ex­pected, re­flect­ing in­sti­tu­tional ca­pac­ity con­straints to ad­dress the large fis­cal and ex­ter­nal im­bal­ances.

Fol­low­ing the sov­er­eign down­grade Moody’s also down­graded the long-term lo­cal and for­eign cur­rency de­posit rat­ings of six Omani banks and took rat­ing ac­tions on seven Omani gov­ern­ment re­lated is­suers.

For­eign di­rect in­vest­ment (FDI) in Oman reached RO7.4bn in 2016, al­most a bil­lion ri­als higher than the pre­vi­ous year, ac­cord­ing to the gov­ern­ment statis­tics.

GCC mar­kets

Dubai Fi­nan­cial Mar­ket (DFM) posted the high­est weekly gain of 1.91 per cent in the GCC. This was fol­lowed by Abu Dhabi and Kuwait bourses which rose 0.61 per cent and 0.3 per cent, re­spec­tively.

To­tal GCC bank­ing sec­tor (banks which have dis­closed re­sults so far) posted a to­tal net profit of US$15.5bn in the first half of 2017, up 4.5 per cent year-on-year. To­tal GCC bank­ing sec­tor net profit touched US$7.85bn for the sec­ond quar­ter of 2017.

Within the GCC, the UAE’s bank­ing sec­tor posted the big­gest year-on-year jump of 14.9 per cent in to­tal net profit, fol­lowed by Kuwait at 7.5 per cent, Bahrain at 3.2 per cent and Qatar at 1.1 per cent. Saudi and Omani banks posted 1.3 per cent and 5.5 per cent de­clines in to­tal bank­ing sec­tor net prof­its for the first half of 2017.

Moody’s down­graded the Gov­ern­ment of Bahrain’s longterm is­suer rat­ing to B1 from Ba2, and main­tained the neg­a­tive out­look. The neg­a­tive out­look re­flects con­tin­ued down­side risks to the rat­ing, which man­i­fest them­selves in height­ened gov­ern­ment and ex­ter­nal liq­uid­ity risks.

Global news

In line with the mar­ket ex­pec­ta­tions, Eu­ro­zone econ­omy grew by 0.6 per cent in the sec­ond quar­ter fol­low­ing a down­ward re­vi­sion of 0.5 per cent growth in the pre­vi­ous pe­riod. GDP growth picked up in Spain and re­mained un­changed in France and Aus­tria. Growth slowed in Bel­gium, Latvia and Lithua­nia.

Other fig­ures showed unem­ploy­ment in Eu­ro­zone was at its low­est since 2009, build­ing on the pic­ture of im­prov­ing eco­nomic health across the area. Ear­lier the In­ter­na­tional Mon­e­tary Fund (IMF) in its World Eco­nomic Out­look re­port stated that the out­look for sev­eral Eu­ro­zone economies was brighter than ini­tially thought, with coun­tries in­clud­ing France, Ger­many, Italy and Spain see­ing growth fore­casts re­vised up.

In an­other im­por­tant global de­vel­op­ment, China closed down 42.4mn tons of crude steel ca­pac­ity in the first half of 2017 or nearly 84 per cent of its tar­get for the whole year, a gov­ern­ment of­fi­cial dis­closed. The coun­try has essen­tially com­pleted its five year tar­get, set last year, to cut be­tween 100150mn tons of ex­cess steel ca­pac­ity within less than two years. China made the pledge in Jan­uary 2016 as it bid to put an end to a price-sap­ping ca­pac­ity glut that had left the coun­try’s mas­sive steel sec­tor mired in debt and losses.

Rec­om­men­da­tion

Tak­ing into ac­count the en­cour­ag­ing re­sponse to the fund rais­ing in China and plan of rais­ing ad­di­tional funds through a loan or a bonds, would bode pos­i­tively for Oman in gen­eral and would fur­ther aid in im­prov­ing the liq­uid­ity.

We be­lieve there is still po­ten­tial in the mar­ket and some of the stocks to go fur­ther up. There are at least 21 stocks be­low the PE mul­ti­ple of 8x and 13 stocks be­low the P/Bv mul­ti­ple of 1x.

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