MSM30 Index declines 11.82 per cent in 2017

MUSCAT: Muscat Securities Market (MSM) ended the year 2017 on negative note with the index declining by 11.82 per cent to close at 5099.28 compared to 5,782.71 at the end of December 2016.

The MSM30 reached its highest level close during the year on February 22 at 5867.46 while the lowest level close touched was 4889.28 on August 17. Values closed up 3.5 per cent to RO 0.992 billion while the volumes dropped by 7.7 per cent at RO 4.27 billion. The MSM Shariah Index ended down by 17.88 per cent at 713.64. With respect to the number of trading days, there were 247 days in 2017 against 246 in 2016.

Sector wise all the indices closed down led by services index which closed down by 13.58 per cent at 2643.43 followed by Industrial Index which closed down by 7.75 per cent to close at 6833.39.

Financial Index dropped the least at -2.58 per cent at 7474.16. The market capitalization increased by 3.9 per cent during 2017 (i.e. RO 0.67 billion) to RO 17.95 billion.

During the year amongst the brokerage houses in Oman, Ubhar Capital closed the year as the number one brokerage house amongst 17 companies with a market share of 21.55 per cent.

FACTORS AFFECTING MSM PERFORMANCE – QUARTERLY 1Q17:

Royalty increase on telecom companies and rise of tax rate for all companies

The general targeted sectors

Companies yearly and dividends announcements

International ratings reports regarding countries companies within region budget and results and and Fed interest rate 2Q17: Strong interest decision local to increase institution

Geopolitical developments in the region

The continuity of the international reports and rating about the region Annual MSM30 revision Cautious sentiment Fed decision to interest rate 3Q17:

IPOs subscriptions and listing of Al Ahlia Insurance Company and Vision Insurance Company Profit booking activities Large special deals Government success dealing with the deficit

Oil prices about $60/b and increase in 4Q17:

Acceleration of companies’ activities (disclosures, acquisitions, mergers or board member’s amendments)

Listing of Oman Qatar Insurance Company and National Life & General Insurance Company

Fed decision to increase interest rate Large special deals Strong oil prices continuity

2017 was not an easy year for the MSM30 which lost 11.82 per cent on annual basis to close at 5099.28. This year can be divided into two upwards periods, two downwards (including one sharp and long) and one relatively stable period.

The benchmark started the year on positive note supported by the announcement of the general budget (although it was a conservative one), yearly companies’ results and disclosures regarding the proposed dividends. This upward trend stopped as the general index started its longest steep during 2017 starting from last week of February to mid of August i.e. six months. The MSM30 lost 16.7 per cent within this time.

Factors affecting the performance including, but not limited to, the rise of corporate tax rate and its adjustments which impacted companies’ results in addition to the ambiguity about tax impact on dividends thus raising foreign investors’ fears who started wave of selling activities.

Further, the increase of Royalty fees in telecom industries hit their net earnings causing foreign investors to reduce their positions in the telecom players who had higher percentage of foreign ownership.

Moreover, negative ratings and international report about the region aided in creating additional pressures.

Factors were not only limited to local ones; many external factors came into force such as the geopolitical tensions including Qatar and Yemen crises which led to further pressures on foreign investors’ sentiment.

The period also saw the summer holidays and the holy month of Ramadhan. During August 2017, the Omani market touched its low which was last seen in January 2016 when oil price touched their record low of USD 27 per barrel.

Later, the MSM30 recovered over one month and half. The period stated with the listing of Al Ahlia Insurance companies followed by chain of IPOs. The recovery in oil prices and positive government disclosures about controlling deficit in the general budget along with commencing of key projects like BP Khazzan gas field with a daily production of 1 bcf of gas per day (bcf/d) and thus supporting the general budgeted earnings. After that, the benchmark registered a decline on Omantel Zain acquisition uncertainty and investors monitoring of geopolitical updates and general cautious sentiment.

Last phase of the year, of which the MSM30 saw relatively stable performance, started from late of October and was filled in general with positive factors like the oil prices at record levels in two years and half in addition to expansionary budget announcement by regional countries which supported investors’ confidence and trading activities.

The chart, which is about the MSM30 monthly performance, reveals that June was the worst month mainly due to geopolitical factors.

March was the second worse as the result of rise in tax and royalty fees impact on corporates results. The month of November was the best performer on better oil prices, positive macro figures and companies’ disclosures.

U-Capital analysis shows that 18 companies have had share capital increases in 2017, through bonus shares (17 companies), convertible bonds (2 companies). The total increases is equal to about RO 86.2 million.

Out of these companies, 12 belong to the financial sector (4 banks, 5 leasing companies, 1 insurance company and 2 investment and holding companies), 4 industrial companies and 2 services companies.

On the other hand, 7 companies saw a share split including Muscat City Desalination Company, Muscat Electricity Distribution Company, Vision Insurance Company, Al Ahlia Insurance Company, Arabia Falcon Insurance Company, National Life & General Insurance Company and Oman Qatar Insurance Company. Moreover, four initial public offerings were recorded including Al Ahlia Insurance Co, Vision Insurance Co, Oman Qatar Insurance Co and National Life & General Insurance Co.