Strong performance of general index supported by leading stocks

The performance of the Muscat Securities Market Index last week was an accurate reflection of our expectations and recommendations outlined in recent reports, in which we pointed to the start of an improved performance and the need to invest in leading stocks. Overall, the market witnessed the return of speculators and investors alike, which supported volume and values.

MSM 30 ended the previous week posting its best weekly performance in more than 2.5 years i.e. since the third week of March 2016.

The index went up by 2.84 per cent on weekly basis backed by many lead shares. Sub-indices all went up lead by the Services Index (+3.86 per cent) then the Industrial Index (+2.84 per cent) and finally the Financial Index (+1.73 per cent). The MSM Shariah Index closed also up 2.2 per cent on weekly basis.

National Pharmaceutical announced that board of directors unanimously resolved to convert the company from a public joint stock company to closed joint stock company (conversion from SAOG to SAOC) subject to approval of shareholders at an extra ordinary general meeting. According to the company, it has received written approvals from its major shareholders supporting the company board’s decision.

National Bank of Oman (NBO) announced that it has mandated banks to arrange a series of fixed-income investor meetings ahead of a potential five-year US dollar-denominated senior unsecured bond sale under its $1.5bn Euro Medium Term Note Programme, subject to market conditions and relevant regulatory approvals. NBO also announced a tender offer for its outstanding $600 million notes maturing in October 2019.

The listed industrial companies total debt went up by 2.5 per cent in 1H 2018 compared with end of 2017. The debt stood at RO 475.4m representing 38 per cent of total assets versus 27 per cent as end of 2017. Two companies mainly Al Hassan Engineering Co and Galfar Eng carry 42.5 per cent of total debt of the listed industrial companies. However, Galfar also saw the highest drop in total debts in terms of value, from RO 175.4m at end of 2017 to RO 158.2m by 1H 2018, i.e. RO 17.2m. On the other hand, Al Jazeera Steel Co total debt increased the most during the period by RO 9.4m during 1H 2018. The following table shows top ten companies in terms of loans.

In the weekly technical analysis, the market index is currently benefitting from a positive technical patterns and indicators that will lead the way upwards. At present, all these indicators are eligible to advance towards the first target (23.6 per cent Fibonacci level) at 4,585 points. The nearest level is to support the index at 4,500 points, while the weekly RSI remained at their positive levels.

The inflation rate in the Sultanate rose by 1.13 per cent in August 2018, over the same month in 2017, according to the latest data released by NCSI. The marginal increase in inflation was driven by a rise in cost of major segments such as transport, which rose by 6 per cent, and education, which its increased by 4.9 per cent in August 2018, over the same period of last year. However, foods and nonalcoholic beverages sub-group witnessed a 1.17-per cent fall in August this year, compared to the same period of last year, shows NCSI data.

Among foods and non-alcoholic beverages group, a marked fall of 6.08 per cent was witnessed in fruits, while price of vegetables declined by 4.50 per cent. In addition, the average inflation rate between January and August 2018 edged up by 0.87 per cent, over the same period last year. The average cost of education in the first eight months of 2018 soared by 4.90 per cent, transport by 3.79 per cent, furnishing and household equipment by 0.88 per cent and non-alcoholic beverages by 1.70 per cent.

As per latest National Centre for Statistics and Information monthly bulletin, the local production and import of natural gas reached 26.5 bn cucm in 7M 2018, a yearly increase of 10.8 per cent. The usage rate was 100 per cent with the industrial projects stood at 58.7 per cent of the total consumption versus 56.8 per cent a year earlier. Gas production CAGR over 2013–2017 was 1.13 per cent.

The MSM 30 topped the gainers of the week amongst regional financial indices with weekly gain of 2.84 per cent while Saudi Stock Exchange was the worst.

Globally, Moody’s recently issued its inaugural edition of its Emerging Markets Chartbook showcasing Moody’s-rated coverage from 101 emerging markets and more than 1,500 rated entities across non-financial corporates and financial institutions. Since 2013, Emerging Markets (EMS) have seen issuances of about $2.6 trillion of Eurobonds placed by sovereigns, sub-sovereigns, corporates, financial institutions, infrastructure and project finance entities. The number of rated emerging market (EM) sovereigns has been increasing since 2004, largely because of African countries obtaining ratings. Latin America and Asia Pacific have the highest number of rated EM corporates and financial institutions at 34 per cent and 31 per cent, respectively, followed by Emerging Europe and Middle East/africa at 20 per cent and 15 per cent, respectively. Among sovereigns in Emerging Markets, Kuwait, Abu Dhabi and UAE are the highest rated at Aa2.

Industrial production in the Euro Area edged down 0.1 per cent in July 2018 from a year earlier. It was the first output contraction since January 2017 mainly due to declines in production of durable consumer goods and energy. Production of durable consumer goods posted the biggest decline (-2.3 per cent vs 1.4 per cent in June), followed by energy (-2.1 per cent vs -3.4 per cent).

On the other hand, capital goods output grew 1.4 per cent, from a 4.5-per cent advance in the previous month. Among Member States for which data are available, the highest increases in industrial production were registered in Poland (7.9 per cent), the Czech Republic (6.7 per cent) and Slovenia (5.9 per cent), and the largest decrease was in Malta (-6.4 per cent), Ireland (-6.2 per cent) and the Netherlands (-2.1 per cent).

IN THE WEEKLY TECHNICAL ANALYSIS, THE MARKET INDEX IS CURRENTLY BENEFITTING FROM A POSITIVE TECHNICAL PATTERNS AND INDICATORS THAT WILL LEAD THE WAY UPWARDS. AT PRESENT, ALL THESE INDICATORS ARE ELIGIBLE TO ADVANCE TOWARDS THE FIRST TARGET (23.6 PER CENT FIBONACCI LEVEL) AT 4,585 POINTS. THE NEAREST LEVEL IS TO SUPPORT THE INDEX AT 4,500 POINTS, WHILE THE WEEKLY RSI REMAINED AT THEIR POSITIVE LEVELS