MSM30 falls as speculative stocks remain in focus
The benchmark index of the Muscat Securities Market (MSM) fell 1.31 per cent last week to close at 4,991.51 points. The performance of MSM30 index was affected due to speculative activities across the board, except on Thursday when Omantel announced the acquisition of a minority stake in Kuwait’s Zain Group.
Omantel shares also witnessed volatility and the stock ended on a flat note on Thursday as investors believed the company has paid a high premium for the acquisition.
All the subindices also recorded declines last week. The biggest loser was Services index which fell 1.81 per cent. Financial and Industrial indices closed down by 1.64 per cent and 1.63 per cent, respectively. The MSM Sharia index dropped 1.31 per cent to close at 735.04 points.
Market activity remained weak during the week as volumes and turnover decreased by 3.7 per cent and 5.4 per cent, respectively.
Al Ahlia Insurance Company’s initial public offering (IPO), which closed subscription on August 2, was subscribed by 2.43 times. According to preliminary estimates, the IPO raised around RO18.2mn against the offer size of RO7.5mn. The offer price of 300bz per share implies an opening market capitalisation of RO30mn.
Oman Qatar Insurance Co (OQIC) would be the third company to come up with an IPO this year in Oman market. The company’s board met on August 3 and announced its intention to launch the IPO. Established in 2004, OQIC is a subsidiary of the Qatar Insurance Company (QIC) and provides life and general insurance cover in Oman.
Omantel board approved to distribute an interim dividend of 20 per cent for the financial year 2017. The dividend will be paid to the registered shareholders of the company as on August 31, 2017.
Omantel announced on Thursday that it has signed a share purchase agreement to buy 425.7mn treasury shares in Kuwait’s Zain Group which form 9.84 per cent of the outstanding common shares. The purchase price of the treasury shares is KWD0.6 per share, valuing the transaction at RO325.6mn.
As per the company’s first half 2017 financials, Omantel has cash balances of RO30.1mn and receivables of RO110mn, making us believe that it will resort to borrowings to finance the transaction. It would be worth mentioning that Zain is one of the contenders that have applied for the third telecom operator license in Oman.
Oman Chlorine Company announced that the commercial operations of its Union Chlorine plant in the Abu Dhabi Industrial Zone has started on August 4, with a designed capacity of 70MT per day. The technical performance guarantee test of the plant have been successfully completed.
Renaissance subsidiary Topaz Energy and Marine (Topaz), a leading offshore support vessel company, announced a new US$100mn contract with Dragon Oil, the upstream oil and gas subsidiary of Emirates National Oil Company (ENOC). Under the terms of the contract, Topaz will supply Dragon Oil Turkmenistan with six vessels. The contract has already commenced with vessel mobilisation and operation ramp-up under way. The contract is scheduled for a five year term with a two year option and brings Topaz’s market leading revenue backlog above US$1.5bn.
Oman Cables Industry announced that the operations of its subsidiary Oman Aluminium Processing Industries LLC (OAPIL) in Sohar might be impacted negatively due to some disruption in supply of liquid metal to OAPIL from Sohar Aluminium.
Within the GCC region, Saudi Arabian bourse was the biggest gainer last week followed by Kuwait and Bahrain. Qatar and Oman markets dropped by 1.65 per cent and 1.31 per cent, respectively.
Moody’s Investors Service changed the outlook on Qatar’s banking system to negative from stable. Moody’s said that weakening operating conditions and continued funding pressures drive its negative outlook. The outlook expresses Moody’s expectation of how bank creditworthiness will evolve in Qatar over the next 12-18 months.
Moody’s expects Qatari banks’ system-wide problem loans to increase to around 2.2 per cent of gross loans by 2018, up from 1.7 per cent as of December 2016. Despite this increase, the non-performing loan (NPL) ratio will remain among the lowest in the GCC heading into 2018. Nonetheless, capitalisation will continue to remain strong providing Qatari banks with substantial cushions to absorb losses.
Saudi Arabia recently allowed foreign companies to fully own engineering services firms without requiring them to partner with a Saudi-owned firm. The foreign companies would need to have existed for at least ten years and should be a multinational with operation in at least four countries to qualify. The kingdom’s investment authority earlier had eased ownership restrictions in the wholesale and retail sectors in 2015.
Bahrain’s government hired banks for a planned US dollardenominated bond issue. Bahrain could raise debt internationally as early as September through both conventional and Islamic bonds. The size of the deal could go up to US$22.5bn.
The UK economy expanded by 0.3 per cent in the second quarter of 2017 as a slump in the pound and a spike in inflation continued to weigh on growth. The growth figure represented a dramatic slowdown from the 0.7 per cent growth in the final quarter of 2016, and the 0.5 per cent growth in the quarter immediately following the referendum.
UK’s Office for National Statistics (ONS) said that growth in the three months up to the end of June was driven by services, which expanded by 0.5 per cent – compared with 0.1 per cent growth in the first quarter of the year. Earlier this week the International Monetary Fund slashed its growth forecast for the UK, saying that it now expects the country’s economy to grow by 1.7 per cent this year compared to a previous forecast of two per cent.
MSCI will announce the results of its August 2017 quarterly index review for the MSCI Equity Indexes on August 10. All global, emerging, frontier and regional markets will be reviewed. All changes will be made as of the close of August 31, 2017.
The US Energy Information Administration (EIA) announced in its latest report that Global consumption of petroleum and other liquids will stand at 98.41mn barrels per day in 2017 and 100.02mn barrels per day in 2018. Global consumption of oil and other liquids stood at 96.99mn barrels per day in 2016, according to the EIA.
The market continues to reel under pressure in the absence of favourable catalysts related to the listed stocks. Recently various announcements related to foreign investment in Oman were made. Among major announcements were: investment by a Chinese firm in Duqm related to manufacturing of SUVs; Majid al Futtaim establishing mall in Sohar; and Qatari Milaha shifting its regional transshipment hub to Sohar port.
The government’s investment friendly policies are bearings its fruit and we expect such announcements to help the economy in future.
MSCI will be announcing the results of its quarterly index review this week. Companies which will be part of the index will see flow of investment in their shares. Investors should watch out for those companies. Investors are advised to follow news at economic, government and company levels as this provides promising opportunities on related stocks.