MSM30 falls as spec­u­la­tive stocks re­main in fo­cus

Muscat Daily - - BUSINESS -

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.

Lo­cal news

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.

GCC mar­kets

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.

Global news

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.

Rec­om­men­da­tion

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.

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