MSM index rises on support from GCC and foreign investors

The main index of the Muscat Securities Market (MSM) last week posted gains as selling pressure from Omani and Arab investors was absorbed by the GCC and foreign investors. In spite of the week being a fourday week, the value of traded stocks declined only marginally.

The MSM30 index continued on its upward trajectory from the previous week, and rose 1.07 per cent last week to close at 4,083.94 points. The Services index advanced the most by 1.23 per cent on weekon-week basis, followed by the Industrial index which rose 0.75 per cent. The Financial index declined 0.22 per cent on weekly basis. The MSM Shariah index closed up 0.62 per cent.

Local news

Musandam Power Company (MPC) announced the successful closing of the phase 1 of its IPO for the listing on the MSM. Based on the price discovery process completed through book building by large and institutional investors, the allotment price for shares has been determined at 316bz per share. In the first phase, the offer was oversubscribed by 5.6 times of phase 1 offer shares. Phase 2 of the IPO, where shares would be offered to retail investors at the price of 316bz has started and will end on November 21 and the shares will be allotted by November 26.

National Gas Company (NGC), in partnership with Singapore-headquartered Petredec, has broken ground on an LPG import and storage terminal at Krishnapatnam Port in the south eastern part of India. The project, valued at around RO21.6mn will be set up under a joint venture in India, NGC Energy India Pvt Ltd, in which NGC will have a 60 per cent stake, while Petredec, will hold the remaining 40 per cent. The project is expected to take 1518 months for completion after securing all approvals. The refrigerated LPG import and storage terminal will have a storage capacity of 30,000 tonnes and a throughput capacity of 1.4mn tonnes per annum.

Oman Chlorine Company announced that it has been awarded a contract by Haya Water for supply of chemicals with a contract value of RO1.77mn for a period of five years.

Renaissance Services announced the successful repurchase/redemption of 100 per cent of its dual currency stepup subordinated perpetual notes (P Notes) of US$125.5mn (RO48.3mn) issued by its wholly-owned foreign subsidiary Renaissance International Limited. The repurchase would reduce the interest expense of the company and consequently result in higher income. The board of Renaissance Services, in a board meeting also proposed and recommended to shareholders the approval of a restructuring of the company’s issued and paid up share capital from RO36.7mn to RO23.6mn, through a proportionate cancellation of shares. The proposed capital restructuring scheme will help to eliminate the company’s accumulated losses, resulting in a stronger balance sheet which will enable the company to pay dividends to shareholders in the future. Gulf Investment Services Company has accepted the subsidiary company’s i.e. Gulf Baader Capital Markets decision taken in its board meeting to reduce its capital from RO7mn to RO2mn.

The inflation rate in the sultanate, measured by movement in the average consumer price index, fell by 0.15 percent in October 2019 compared to the same month in 2018, according to the National Center for Statistics and Information. The prices of housing, water, electricity, gas, and other fuels fell by 0.3 per cent, transport by 2.48 per cent, communication by 0.3 per cent; and miscellaneous goods and services by 3.69 per cent in October 2019 compared to the same month of the previous year.

GCC markets

Within the GCC financial markets, the Saudi stock exchange was the best performer during the week while Bahrain was the worst performing market down by 0.88 per cent.

The UAE Cabinet approved a zero-deficit federal budget of AED61.35bn for 2020 fiscal year. This is the largest budget since the establishment of the UAE. Some of the major allocations are followings: Social development and social benefits programmes amount to AED26.7bn; Allocations to government affairs amount to AED23bn; About AED4.9bn has been allocated to healthcare and disease prevention; AED9.9bn is allocated to infrastructure and economic affairs; and AED1.8bn has been allocated to Sheikh Zayed Housing Program.

The GCC Bureau of Technical Secretariat for Anti-Injurious Practices in International Trade has announced the results of anti-dumping investigations against imports of ceramics and porcelain products of Indian, Chinese and Spanish origin to the GCC. Dumping margins ranged between 5.8 per cent and 106 per cent were announced to be implemented.

Global news

China’s trade surplus increased in October. Trade surplus increased to US$42.81bn in October 2019 from US$32.97bn in the same month a year earlier and above market expectations of a surplus of US$40.8bn. This was the largest trade surplus since July, as exports declined 0.9 percent year-on-year to US$212.93bn, while imports dropped at a faster 6.4 per cent rate to US$170.12bn.

A week earlier, it was announced by both China and the US that an initial trade deal between the two countries would roll back a portion of the tariffs they are placing on each other’s products. Such a development will not only bode well for China but for global trade as well.

On the oil market front, we witnessed multiple announcement in last few weeks. Various countries announced new oil discoveries. New oil discoveries in Abu Dhabi, Iran and Brazil are expected to add sizable barrels to Oil reserves. In Brazil, the four prospective fields are estimated to hold as much as 15bn barrels of recoverable crude.

In the UAE, the new discoveries included 7bn barrels of crude oil and 58tn cubic feet of natural gas. That raised UAE crude oil reserves to 105bn barrels, overtaking neighbouring Kuwait for the world’s sixth largest oil deposits. The UAE’s natural gas reserves were also boosted to 273tn cubic feet.

Iran announced that a vast oil field containing an estimated 53bn barrels of crude oil was discovered in the country. However, a day later, it was rectified by the Iranian Oil Minister and he announced that only 22bn barrels are available. Out of the amount at the site and only a tenth - 2.2bn barrels are extractable due to technological limitations.

Recommendation

The recent positive developments in the news flow on the geopolitical front internationally as well as regionally are expected to alleviate investor misgivings. However, investors are advised to remain cautious and make informed investment decisions.

Regionally, the markets are expected to be overshadowed by the looming Aramco IPO, whose pricing is expected to be announced today.

Locally, the market rose last week after greater visibility of companies post announcement of detailed financial results and their future action plan. We reiterate this stance of reading the company financials in the absence of any other catalysts.