MSM30 declines as cautious sentiment prevails
Investors at the Muscat Securities Market (MSM) remain cautious and watchful amid the ongoing earnings season, affecting trading volumes and market turnover. Announcement of corporate results and pressures from the regional markets contributed to increased losses in the regional financial markets last week.
The MSM30 index declined 0.8 per cent on weekly basis. Financial index led the losses closing down by 1.38 per cent. This was followed by Industrial index which lost 1.1 per cent, while Services index decreased 0.89 per cent. The MSM Shariah index closed down by 1.02 per cent on weekly basis.
At the MSM, the daily average turnover in the first nine months of 2018 stood at RO3.4mn which is 7.5 per cent lower on yearly basis.
Aiming to support the trading activities, the MSM board of directors approved to extend daily trading session to be of four hours, starting from 10am to 2pm. This come on a request of the brokerage firms. The trading session extension will be for a trail period of six months starting from November 1.
SMN Power Holding announced that a small fire broke out in the load voltage (LV) switchgear room at the Barka II plant. The estimated financial impact to date amounts to RO200,000 because of shutting down of the desalination plant. Referring to a previous disclosure regarding the operations of the Barka II desalination plant after fire broke out in the LV switchgear room, SMN Power Holding reported that the plant was operational on October 8 and that the expected financial loss due to this event is about RO385,000.
In a step to attract more foreign direct investments, Nama Holding announced the launch of a privatisation programme for Nama Group’s electricity transmission and distribution companies. During a press conference in London, the company stated that the partial privatisation of the transmission company and one of the distribution companies through an international strategic partner. Nama Holding announced the sale of upto 49 per cent of Nama Holding shares in Oman Electricity Transmission Co, and the sale of upto 70 per cent of Nama Holding shares in its distribution and supply companies respectively: Muscat Electricity Distribution Co, Majan Electricity Distribution Co, Mazoon Electricity Distribution Co, and Dhofar Power Co.
The Undersecretary of the Ministry of Oil and Gas said that Oman has the capacity to raise the ceiling of its production of oil by about 40 thousand barrels per day, a share that was previously reduced in accordance with the agreement with the oil producing countries from OPEC and other producers. He added that the increase in production is linked to the agreement between OPEC and other producers to increase quotas in order to stabilise the oil market in the event of a shortage of supply significantly. Oman’s daily average production in the first nine months of 2018, as per the available data, stood at 972,400 barrels.
As per the Central Bank of Oman’s (CBO) latest statistical bulletin, the total credit of the Omani banking sector (conventional loans and Islamic financing) stood at RO24.27bn as at the end of July 2018, up by 6.3 per cent year-on-year and flat on month-on-month basis. Total deposits stood at RO22.28bn, up by 3.4 per cent year-on-year but down by 0.3 per cent month-on-month or RO64mn from Jun to July 2018.
Within the GCC financial markets, Saudi Stock Exchange dropped the most posting weekly loss of 5.76 per cent while Qatar Exchange was the least loser.
The International Monetary Fund (IMF) raised the economic forecasts of all the GCC countries for 2018 and 2019 in its latest World Economic Outlook report. The IMF attributed the upward revision to a pick-up in non-oil economic activity and a projected increase in crude oil production in line with the revised OPEC and OPEC+ agreement. In the GCC, Oman’s 2019 estimated GDP growth of 5.05 per cent would be highest in the region followed by Kuwait at 4.06 per cent in 2019. Saudi Arabia is estimated to grow at 2.3 per cent in 2018 and 2.43 per cent in 2019. UAE is estimated to grow by 3.66 per cent in 2019. Bahrain, which received US$10bn in financial aid last week from Saudi Arabia, Kuwait and the UAE, has embarked on a fiscal stabilisation programme. The IMF has projected a 3.5 per cent GDP growth this year and 2.59 per cent in 2019 for Bahrain. While Qatar is expected to grow by 2.82 per cent in 2019.
Qatar announced last week that it has set aside US$2bn to attract multi-national companies to its financial centre. International companies that set up a hub in Doha will be provided with free offices and tax incentives as well as seed capital to cover five years of operating expenses. In return, they will be expected to give a commitment to stay in the country for at least a decade. Qatar Financial Centre’s (QFC) CEO said Qatar’s financial hub was targeting to launch the incentive plan in the first quarter of 2019 once all governance structures are in place. QFC will be targeting at least 1,000 companies, with the intention of creating 10,000 more jobs by 2022.
It is early to judge the performance of companies as only a few have announced their initial results. Also, we should consider the seasonality and some accounting adjustments in addition to investment losses beyond the control of companies as a result of pressures that affected the performance of financial markets.
Investors are advised not to be confused as the fundamentals of the economy, announced projects, upcoming privatisation processes and even corporate results are supportive factors, thus investors should be not in a hurry and should take a breather before investing.
External pressures are beyond the control of companies and the exposure of some existing markets is in fact an opportunity to build investment positions in those companies whose business is not affected.