Financial stocks drag MSM down
The benchmark MSM30 index of the Muscat Securities Market last week recorded a 1.64 per cent drop led by sharp declines in financial sector stocks amid the announcement of financial results.
All other sectoral indices ended on positive note except Financial index which dropped 2.23 per cent for the week. Industrial index was higher by 1.56 per cent and Services index was up by 0.17 per cent. MSM Shariah index declined by 1.18 per cent.
The MSM recorded net foreign investment outflows of US$105mn in 2020. Foreign investment outflows in the month of December stood at US$0.6mn compared to US$16mn in November 2020.
Local news
► Oman is looking to raise up to US$2bn with a loan arranged mostly by local and regional lenders. Oman is now working with a group of banks to raise a US$1.1bn facility which could go up to US$2bn in size depending on market appetite. The loan, now being marketed to a wider group of lenders, has a 15-month maturity with the possibility to extend it by an additional 12 months at the borrower’s discretion.
► The Central Bank of Oman, in collaboration with the Ministry of Finance and Ministry of Labour, has mandated the banks operating in the sultanate to provide a seamless mechanism for transferring salaries and recurring payments (bulk payments) of all government and private agencies/companies through electronic banking services. This corporate banking channel is safe and secure. It aims to stop using any methods that do not meet the safety and security standards. The move also aims to avoid expensive methods that consume a lot of time and effort.
► Muscat Gases Company signed an agreement with Al Aman Industrial & House Company to acquire the 100 per cent share capital of Al Aman, including all LPG filling stations owned by them in Oman. Objective of the acquisition are to diversify the investments for enhancing the company’s position and to create better growth opportunities in the future to create value for shareholder’s equity.
► The Capital Market Authority approved the main prospectus of Mudharabah Sukuk of Takaful Oman Insurance for the offer of perpetual sukuk worth RO25mn. The Omanbased Sharia’a-compliant insurance provider Takaful Oman, has announced in the prospectus the first issuance of RO6mn in a private placement at an issue price of RO1.020 for each sukuk unit made up of RO1 nominal value in addition to 20bz for the issue costs. The minimum limit of the subscription in the first issuance is 100,000 sukuk. The subscription will commence from today.
► Al Kamil Power announced that given the uncertainty around the extension of its power purchase agreement, the company has reviewed the possible future scenarios and evaluated them by assigning appropriate weights and eliminating present value of future cash flows. Based on the assessment it will recognise impairments of RO6.965mn. This non-cash charge represents estimated excess of the carrying value (net book value) over the net present value of future cash flows.
► Total registered vehicles in Oman rose to 1.555mn in November 2020 compared to 1.548mn at the end of 2019. New vehicles registered in the month of November 2020 were 3,416 compared to 3,137 in the month of October 2020. Private vehicles amounted for 78 per cent of the total registered vehicles in Oman followed by commercial, rental, taxis and government.
► The inflation rate in the sultanate, measured by movement in the average Consumer Price Index, fell by 1.42 per cent in December 2020 compared to the same month of 2019, according to the latest data released by NCSI. According to the NCSI report, the inflation rate in December fell by 0.18 per cent compared to November. However, the transport category prices fell by 0.59 per cent; miscellaneous goods and services by 0.13 per cent; food and non-alcoholic beverages by 0.09 per cent; and furnishings, household equipment, and routine household maintenance by 0.01 per cent in December 2020 compared to November 2020. In contrast, the prices of restaurants and hotels group increased by 0.05 per cent, and the prices of housing groups, water, electricity and other fuels, health, communication, recreation and culture, and education remained stable.
GCC markets
The aggregate sales of 17 Saudi cement producers increased by 9 per cent to 5.2mn tonnes in December 2020, compared to 4.7mn tonnes in the same month last year, according to recent data issued by Yamama Cement Company. As many as 11 cement producers reported higher sales, led by Arabian Cement Company with a 43 per cent rise on year-on-year basis. It was followed by Qassim Cement and Najran Cement with 30 per cent year-on-year growth each. On the other hand, six other companies reported lower sales, led by Northern Region Cement that saw an 11 per cent fall in sales. Clinker production in Saudi Arabia fell by 3.4 per cent to 4.4mn tonnes in the same month, compared to 4.6mn tonnes in December 2019. Clinker inventories reached 37.1mn tonnes by the end of December, down 12.8 per cent from 42.5mn tonnes in December 2019.
The number of insurance subscribers in Saudi Arabia fell 10 per cent to 10.05mn by the end of 2020, from 11.15mn in 2019, according to a survey by Argaam, based on data issued by the Saudi Council of Cooperative Health Insurance (CCHI). The number of insured Saudis decreased by 49,700, while the insured non-Saudis declined by about 1.05mn. The number of insured Saudis and their dependents reached about 3.44mn by the end of 2020 (representing 34 per cent of the total subscribers), while the number of non-Saudis reached about 6.61mn (representing 66 per cent of total subscribers).
Brent oil touched approximately US$56 per barrel at the end of last week, a level last seen in February 2020. Oil is poised for the longest winning streak in almost two years after an industry report pointing to another decrease in US crude stockpiles added impetus to a new year rally driven by Saudi Arabian output cuts. The American Petroleum Institute reported crude inventories dropped by 5.82mn barrels last week, according to people familiar with the figures.
Recommendation
Global markets remained range bound as the impeachment of the US President Donald Trump and political pressures kept investors skeptical. On the positive side we saw investor churning their portfolio from tech stocks towards oil and gas and banking sectors.
Regionally, all the markets except Oman were positive last week led by the increase in oil prices and better earnings expectations for the full year. We expect this momentum to continue in the coming week.
Locally, the market was driven by financial results announcement. Financial companies results were mixed with some banks posting good results while some lower than our expectation. As expected, companies in ceramic and insurance sector were star performer.
We expect some good dividend announcements in insurance and ceramic sectors.