Regional geopolitical tensions weigh on MSM benchmark

The MSM 30 Index declined last week on the weakening of local and foreign investor sentiment due to escalation in regional geopolitical tensions. The market saw few Omanis and foreigners exit, whereas GCC and Arab investors remained net buyers of RO 1.05m worth of securities during the week.

The MSM30 Index closed the week down by 0.70 per cent w-o-w. All sub-indices closed down, led by the Financial Index which closed down by 0.70 per cent w-o-w, followed by the Services & Industrial Index, both of which closed down by 0.38 per cent w-o-w respectively. The MSM Shariah Index also closed down by 0.37 per cent w-o-w.

Renaissance Services SAOG has announced capital reduction following shareholders’ approval. The Company’s registered issued share capital has been successfully reduced from RO 36.73m to RO 23.64m.

Oman Cables announced, with reference to its disclosure on December 5, 2019, regarding the acquisition of entire share capital of the subsidiary company Oman Aluminium Processing Industries LLC (OAPIL), that it has finalised the process on January 8, 2020. The subsidiary is now 100 per cent owned by Oman Cables compared to 51 per cent earlier.

MSM recently issued a circular regarding free float and capping factors of MSM Indices Constituents. There was no change in the constituents of MSM 30. Weightage of top-10 companies in MSM 30 stand at 76.68 per cent. All the banks (excluding Alizz Islamic Bank) are in the top-10 with total weight in MSM30 at 51.5 per cent.

Oman Towers Company (OTC) and Oman Future Telecommunications Company (Vodafone Oman) has signed the main agreement to use the infrastructure of inactive telecommunication towers.

As per the agreement, OTC will provide telecommunication towers for Vodafone Oman’s global mobile networks, in parallel with plans to deploy the mobile network for Oman Future Telecommunications Company. Vodafone Oman is expected to enter the local market during the second half of 2020.

Gross electricity production in Oman during 10M19 stood at 33,452.6 GWH compared to 32,581.1 GWH during the same period 2018. During the same period, net electricity production rose from 32,308.3 in 10M18 to 32,895.1 in 10M19.

Region of Al Batinah and Al Dhahirah contributed the most to the electricity production at 60.1 per cent (20,098.4 GWH) this year compared to 51.6 per cent in 2018. Al Sharqiyah ranked second in terms of contribution to the total at 22 per cent (7,145 GWH) followed by Dhofar at 10 per cent (3,239.8 GWH). Muscat net electricity production dropped the most by 58.3 per cent YOY during 10M19 to 1,366.1 GWH compared to 3,272.5 GWH in 10M18.

The RO overnight domestic inter-bank lending rate declined to 2.397 per cent in October 2019, as compared to 2.675 per cent a month ago. It is, however, above 2.317 per cent recorded in October 2018. The rate has been declining steadily since the highest ever recorded at 2.770 per cent in July 2019.

All GCC financial markets closed down led by the Bahrain Bourse (-0.91 per cent). Net foreign flows in GCC (ex. Bahrain) total $31.3bn in 2019. The growth in the inflows in 2019 was a combination of various reasons mainly increase in foreign ownership limit by Qatar, Kuwait getting upgraded from Frontier to Emerging market, KSA upgrade and the passive flows and last and the most important one being the inclusion of Saudi Aramco in Saudi Arabia and its subsequent inclusion in MSCI index. Net inflows of over $24bn in Saudi Arabia comprise 78 per cent of the total flows of GCC.

Internationally, oil prices are having a good run at the start of 1Q-2020 as seen in 1Q-2019. Major factors contributing to the rise this time are:

GROSS ELECTRICITY PRODUCTION IN OMAN DURING 10M19 STOOD AT 33,452.6 GWH COMPARED TO 32,581.1 GWH DURING THE SAME PERIOD 2018. DURING THE SAME PERIOD, NET ELECTRICITY PRODUCTION ROSE FROM 32,308.3 IN 10M18 TO 32,895.1 IN 10M19.