Local news
Oman will introduce VAT ‘sometime during the beginning of the year 2021’, H E Dr Ali bin Masoud bin Ali al Sunaidy, Minister of Commerce and Industry said. The introduction is ‘something that people don’t like, but this is something that we have been lobbying for’, he said in an interview on the side-lines of the World Economic Forum in Davos last week. All six members of the Gulf Cooperation Council agreed in 2016 to introduce a 5 per cent rate of VAT but so far only three countries have done so. Saudi Arabia and the UAE both introduced the tax in January 2018 and Bahrain followed suit last year. Oman, whose economy witnessed slowdown in recent years following the collapse in oil prices in 2014, held off from introducing VAT so far despite calls from the International Monetary Fund (IMF) to speed up its roll-out. The sultanate has been introducing a series of other reforms, including cuts to fuel and electricity subsidies.
Al Hassan Engineering announced that Abu Dhabi judicial department has issued a judgment on January 21, 2020 ordering the liquidation of Al Hassan Engineering Co Abu Dhabi and appointing a liquidator to start the process.
Financial Services board approved the reduction of company’s capital from RO6.5mn to RO2.0mn and use full legal reserves and share premium in order to write off all accumulated losses during the past years. As of 2019, the company’s accumulated losses are estimated to be at RO7.17mn (first nine months of 2019 losses at RO6.6mn and fourth quarter of 2019 loss at RO0.57mn).
The Capital Market Authority approved the extension of the deadline for public subscription to Aman Real Estate Investment Fund (Aman REIF) IPO, till February 2, 2020. The IPO of Aman REIF had initially been floated from January 2 to January 16. The fund has 100mn units open for public subscription, each valued at 100bz. These units constitute 50 per cent of the fund’s total capital and they are offered to investors at a rate of 102bz.
GCC markets
Within the GCC financial markets, Abu Dhabi Securities Exchange topped the gainers while Saudi stock market was the worst. The IMF reduced Saudi Arabian economy’s expected growth rate to 1.9 per cent for 2020, revising down its forecast of 2.2 per cent growth from just three months ago, due to expected lower Saudi oil production as the Kingdom has pledged to overcomply with the OPEC+ oil production cuts.
In its January update of the World Economic Outlook (WEO) from October, the IMF cut its economic growth projections for the global economy and that in the Middle East and Central Asia region. Economic growth in the Middle East and Central Asia is now seen at 2.8 per cent this year, down by 0.1 percentage point from the October estimate.
In the October forecasts, the IMF had said that Saudi Arabia would need oil prices at US$86.50 in 2019 and
US$83.60 in 2020 in order to balance its budget. ‘The downgrade for 2020 mostly reflects a downward revision to Saudi Arabia’s projection on expected weaker oil output growth following the OPEC+ decision in December to extend supply cuts,’ the IMF said.
Global news
IMF recently issued its World Economic Outlook report. The IMF projects global growth of 3.3 per cent in 2020 and 3.4 per cent for 2021, a downward revision of 0.1 percentage point for 2020 and 0.2 for 2021 compared to those in the October World Economic Outlook.
The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years. In a few cases, this reassessment also reflects the impact of increased social unrest. On the positive side, market sentiment has been boosted by tentative signs that manufacturing activity and global trade are picking up, a broad-based shift toward accommodative monetary policy, intermittent favourable news on US-China trade negotiations, and diminished fears of a no-deal Brexit.
Recommendation
The earnings season is over except Omantel which will announce its results in coming two-three weeks. Overall the results have been mixed. Sectors like insurance, cement, logistics and utilities announced better results than last year and we can expect better dividend announcement from companies within them.
The MSCI is expected to release the provisional list for Kuwait in this week. This event would be closely followed by the investors community regionally.
Also regionally the result season has not gathered much steam. We will witness more result announcement specially of various blue chip companies, which will set the tone for their future market movement.