MSM witnesses its best weekly performance in over 2.5 years

The benchmark index of the Muscat Securities Market (MSM) last week posted its best performance since late March 2016 due to increased local institutional support to the market and strategic moves of the fund managers ahead of year-end.

The MSM30 index closed the week up by 3.1 per cent at 4,548.72 points. All sub-indices closed higher on weekly basis led by Financial index (2.81 per cent up) followed by Industrial index (1.49 per cent up) and Services index (1.17 per cent up). The MSM Shariah index also closed up by 2.57 per cent.

The MSM30 index’s performance during November was moderate and victim to external factors, despite relatively good results posted by the listed companies. The general index closed down by 0.25 per cent month-on-month with average daily turnover and volume of RO1.88mn and 15.8mn shares, notable down on yearly basis.

Foreign institutional investments registered a net buy of RO2.16mn in November, which is the second month in raw to see the entry of those investments. However, for the first 11 months of 2018, foreign investments were net sellers with RO113.8mn due to special deals.

Local news

Galfar Engineering & Contracting Company said it has entered into a contract worth RO5.37mn related to some work at Duqm from Saipem SPA, Oman. The parent company’s order book at the end of September 2018 stood at RO456mn. The group’s net profit for the first nine months of 2018 was RO2.24mn compared with a net loss of RO3.76mn during the same period last year.

Raysut Cement disclosed on the MSM that it has been awarded a contract related to installation of waste heat recovery system that will use the currently wasted heat to generate 9MW of power. The project is expected to take at least 18 months to be completed. As per various media sources, the company expects to save up to 30 per cent of its power cost upon completion of this project.

Furthermore, Raysut Cement disclosed on the MSM website about the news circulated in several local and international media regarding the expansion plans of the company. The company disclosed that such plans are at a premature stage pending board approval. During the week, many news sources have indicated that Raysut Cement is in the process of investing hundreds of millions of dollars in acquisitions in India and Africa.

As per the latest National Center for Statistics and Information (NCSI) monthly bulletin, the local production and import of natural gas reached 34.2bn cubic metres in the first nine months 2018, a yearly increase of 11.6 per cent. The usage rate was 100 per cent with the industrial projects stood at 58.6 per cent of the total consumption versus followed by oil fields (21.9 per cent), then power generations (18.9 per cent) and finally the industries area (0.5 per cent).

GCC markets

Within the GCC financial markets, the MSM topped the gainers in the region followed by Qatar Exchange which gained 2.26 per cent on weekly basis, while Dubai Financial Market was the biggest loser closing down by 3.31 per cent.

Within the GCC, an analysis of listed banks’ financials for the first nine months of 2018 earnings indicates that Oman’s banks posted the highest increase in net loans at 6.9 per cent year-on-year, followed by the UAE banks at 6.3 per cent, Kuwait banks at 3.4 per cent year-on-year, Qatari banks at three per cent, and Saudi and Bahrain banks at 0.4 per cent year-on-year. Total GCC banking sector grew its total net loans to US$1.31tn in the first nine months of 2018, up by 3.3 per cent year-on-year and 0.9 per cent quarter-on-quarter, lion’s share of which lies with the UAE (30.2 per cent) then Saudi Arabia (28.7 per cent).

Total GCC customer deposits of listed banks stood at US$1.45tn at the end of the first nine months of 2018, up by one per cent quarter-onquarter and 4.4 per cent yearon-year. Fastest year-on-year growth was seen in the UAE banks at 8.6 per cent year-onyear, followed by Qatari banks at 4.9 per cent year-on-year, and Omani banks at 3.6 per cent, Kuwait at 2.1 per cent and Saudi Arabia at 1.5 per cent and Bahrain at 1.1 per cent year-onyear. The entire banking sector’s loan-to-deposit ratio stood at 90.7 per cent.

Global news

Globally, data compiled by Bloomberg regarding LNG vessel tracking showed that Australia overtook Qatar as top LNG seller in November 2018 for the first time during a month. Australia exported 6.623mn tons of LNG in November 2018 compared to 6.318mn from Qatar. Historically, Australia LNG exports form 22.5 per cent of total world exports as per available data compared to 26 per cent for Qatar.

Recommendation

We are seeing active movements in the market ahead of the year-end which reflects portfolios managers’ strategic actions, as well as funds and institutional investments in order to support the performance of their investments for the current year. We expect this trend to continue during the coming period.

The companies’ announcements regarding expansionary plans to ease pressures in their traditional markets, have also attracted investors to these companies, especially since they are relatively low leveraged companies thus able to exploit their financial position better.

With the expected oil prices to be at acceptable levels, the overall economic situation of the region looks stable. Oman enjoys healthy macroeconomic figures which indicates the ability to sustain vital projects.

Investors are advised to focus on companies that are able either to maintain a good dividends (taking into account their operational performance) or whose shares represent an opportunity of growth.