MSX posts weekly decline

The benchmark index of the Muscat Stock Exchange posted a weekly drop after all the sectoral indices fell during last week. The MSX30 Index ended the week lower by 0.3 per cent. The Financial Index closed down marginally by 0.06 per cent, while Industrial and Services Indexes ended lower by 0.55 per cent and 1.09 per cent, respectively. The MSX Shariah Index also closed lower by 1.61 per cent.

The MSX last week signed a memorandum of understanding (MoU) with Iraq Stock Exchange (ISX) on drafting procedures of joint cooperation between the two exchanges. The MoU targets exchanging information and promoting best practices related to publishing and declaring information. The MoU also aims to support the integrity and competence of the stock exchanges in both countries.

Local news

▶Oman's state budget recorded a surplus of RO357mn at the end of the first quarter of 2022. The surplus will be utilized for accelerating economic recovery, enhancing development spending and reducing the risks of the public debt portfolio. In the first quarter of this year, public revenues amounted to RO3.025bn, up by 66.3 per cent as compared to the same quarter in 2021, according to the monthly bulletin of the Ministry of Finance. This is mainly as a result of an increase in the net oil revenue by 70.2 per cent to RO1.565bn compared to the same period in 2021.

▶The Sultan Qaboos University (SQU) awarded Oman National Engineering and Investment Company (ONEIC) a contract for operation and maintenance of electrical and mechanical equipment and civil maintenance of SQU Hospital. The value of the contract is RO2.87mn for the period of two years commencing on July 1, 2022.

▶Oman telecom sector data for March revealed that the fixed-line subscribers are down 3.8 per cent while mobile subscribers are down 0.3 per cent year-on-year. Within mobile segment, prepaid subscribers are down 5 per cent while postpaid subscribers are higher by 24.8 per cent year-on-year in the first quarter of 2022. Active mobile broadband subscribers are up by 2.2 per cent.

▶Oman unemployment rate stood at 2.3 per cent in March 2022 compared to 2.1 per cent in February 2022. Unemployment amongst female stood at 7.5 per cent while unemployment in males stood at 1.1 per cent in March 2022. Amongst the age group, 15-24 years age group recorded the highest unemployment at 12 per cent, followed by 5.3 per cent for the age group 25-29 years and 1.7 per cent for the age group 3034 years. In terms of unemployment by educational status, highest was 10 per cent for the people with higher diploma.

▶Omani banks’ credit fundamentals are recovering as pressures on the operating environment have eased and economic activity is gradually picking up amid higher oil prices, Fitch Ratings said last week. In a new report on Oman’s banking sector, Fitch said that Omani banks have been fairly resilient to the pandemic shock which caused a 3.2 per cent GDP contraction in 2020. Omani banks’ performance metrics recovered substantially in 2021 and this is expected to continue in 2022, supported by higher interest rates.

▶The first industrial city in Musandam Governorate has begun welcoming investors eager to capitalise on its proximity to key regional markets. Mahas Industrial City — the latest addition to the expanding chain of national industrial parks administered by the Public Establishment for Industrial Estates (Madayn) — is coming up in the Wilayat of Khasab. An area of around 1.44mn sqm has been earmarked for the new facility, primarily for small and mid-scale manufacturing ventures.

According to Mubarak bin Salem al Ghailani, Acting Director General of the new industrial hub, a local contractor has been awarded a contract valued at around RO5mn for the development of basic infrastructure for the project.

GCC markets

Business conditions in Saudi Arabia’s non-oil economy remained strong in April, but confidence worsened amidst concerns over inflation, the war in Ukraine and renewed COVID-19 restrictions in Asia, according to a new survey.

The headline seasonally adjusted S&P Global Saudi Arabia Purchasing Managers’ Index (PMI) dipped to a three-month low at 55.7, compared to 56.8 in March. However, S&P said its latest study still indicates a 'strong improvement in non-oil private sector business conditions' in the kingdom, citing that the PMI reading is 'firmly above' the 50.0 neutral mark.

Purchasing activity and inventories in Saudi Arabia also rose at the sharpest rate since December 2017, as businesses looked to meet demand and expand inventories amid rising material costs, while job creation accelerated at its fastest pace since June 2021.

The UAE’s non-oil private sector maintained robust growth in April supported by improving demand and a sharp rise in exports but cost pressures were a matter of concern, a survey showed last week. The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) slipped to 54.6 in April from 54.8 in March, a three-month low. The indicator however remained above the 50.0 mark that separates expansion from contraction.

There was a sharp rise in non-oil output at the start of the second quarter of the year as firms continued to benefit from increased new orders and project work. 'In fact, the expansion in activity was the fastest registered since December last year, with just under a quarter of respondents seeing output increase since March,' the report said.

Global oil prices rose about 4 per cent on Friday as US gasoline prices jumped to a record high, China looked ready to ease pandemic restrictions and investors worried supplies will tighten if the European Union bans Russian oil.

Recommendations

Globally, the markets witnessed a wild week as relief at signs of peaking inflation vied with fears that policy tightening by the US Federal Reserve could tilt the economy into recession. Big companies in the US market has dropped to 52week low as extreme volatility continues.

Regionally, all the GCC markets ended the week lower due to higher inflation and high volatility. Locally, the stock market has seen decrease in trading volume as inflation hits most countries.

We advise investors to look closely to the full disclosures for for the first quarter of 2022 and to take notes on the companies' guidance for the year.