MSM30 closes down on external factors
Factors such as cautious sentiments, geopolitical tensions and oil price movements controlled the regional markets’ performance during last week. Locally, the workshops and official statements and moves about the outlook of the country were key elements in drawing better future, which were monitored by investors.
The benchmark MSM30 index ended the week (only two trading days) 0.85 per cent down on weekly basis and closed at 5,066.09 points. All the subindices closed lower, led by Financial index (-0.71 per cent) followed by Service index (-0.68 per cent) and Industrial index (-0.26 per cent). The MSM Shariah index also closed 0.73 per cent down.
Local news
National Life and General Insurance (NLGIC) was listed in the previous week. The stock ended the listing day without change after it gained 3.8 per cent on opening at 332bz per share. Trading values formed 13.36 per cent of total market turnover on the listing day.
Taageer Finance invited its shareholders to attend and extraordinary general meeting to consider and approve the issue of 5mn unsecured, subordinated, non-convertible bonds for RO5mn with a green-shoe option of 2.5mn bonds worth RO2.5mn. Additional bonds will be by way of private placement at face value of RO1 per bond plus issues expense. This is subject to regulatory approval. The tenor of the bonds will be two years and will be listed in Muscat Securities Market (MSM).
Technical analysis
In the weekly technical analysis, the MSM30 index reversed its direction due to pressures from blue chip firms. Currently, the index is moving within a range of 5,060 points and 5,130 points. If the index crossed down 5,060 points, this will press the index to reach 5,000 points in the coming period.
In terms of technical analysis of GCC indices, we see the following: Saudi stock market target at 6,820 points, Dubai Financial Market index target at 3,345 points, Abu Dhabi market index target at 4,343 points, Kuwait market index target at 6,135 points, Qatar market target at 7,730 points, Bahrain market index target at 1,260 points.
The analysis of foreign institutional investments in the MSM during November 2017 showed a net sell of RO5.8mn resulting in total net sell of RO39.25mn during the first eleven month in 2017 as per the MSM statistics.
Data related to corporate bonds on the MSM website showed that three bond issues will mature in 2018. First bond issue to be matured next year is Bank Muscat Compulsorily Convertible B B 3.5 (issue value RO32.4mn and market value RO34mn). Second bond to mature next year is Bank Sohar Bonds 4.5 (issue value RO2.38mn and market value of RO2.28mn). Third bond to mature is Al Omaniya Financial Services Convertible Bonds 6 (issue value RO1.83mn and market value of RO1.83mn). The first bond issue will mature in March, the second in April and the third issue in May 2018.
GCC markets
Within the GCC markets, Saudi stock exchange was the best performer as it closed up by 1.16 per cent while Bahrain bourse was the worst as it dropped by 1.27 per cent on weekly basis.
The adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) rose to 57.5 in November, its highest level since August 2015. The level represents increases of 3.4 per cent and 4.5 per cent on monthly and yearly basis, respectively. The strong performance of the non-oil private sector was mainly supported by production expansion and new orders.
The value added tax (VAT) which will soon be implemented in all the GCC countries is the talk of the town as one by one all the regional countries are slowly rolling out the details about the good and services which will be subject to VAT. The UAE was the latest as the Federal Tax Authority (FTA) has revealed a list of goods and services that will be subject to VAT as of January 1, 2018.
Global news
Globally, the European Union in February began screening 92 jurisdictions seen as possible tax havens and finally last week decided to blacklist 17 jurisdictions deemed as tax havens. The aim was to promote good governance worldwide, in order to maximise efforts to prevent tax fraud and tax evasion. The countries on the list are Amer- ican Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and the UAE. EU said it is not just a oneoff process and they will regularly review and update the list in the years to come.
Data published by the US Commerce Department about the US trade deficit in October showed a monthly increase by 8.6 per cent to US$48.7bn, the highest since January this year. The hike reflects the higher cost of imports mainly due to oil prices in addition to higher import of mobile phones, apparel, household goods and service-related purchases. Imports climbed 1.6 per cent to US$244.6bn in October. Imported oil prices averaged US$47.26 per barrel in October, the highest since August 2015.
Recommendation
The current workshops, forums and statements by the government regarding the current performance of the economy and the outlook are fundamental pillars to support the investors’ confidence and the local economy.
The geopolitical tensions will remain as pressure factors, but the local market and Oman are considered safe havens in the current situation taking into account the country’s stability, security factors and peace initiatives of the sultanate.
We advise investors to monitor current projects developments, government moves and decisions regarding economic support mechanisms in addition to the targeted sectors. We advise investors to benefit from attractive multiples and high yields. Furthermore, the continuity of high oil prices and current averages will result positively on public finance of the country thus more ability to stick with spending on vital projects that contribute to economic diversification.