MSM declines to a nine-year low

The Muscat Securities Market (MSM) declined 6.2 per cent YTD as the benchmark MSM 30 index plummeted to 4,781.9 points – a level last seen in April 2009. The decline effectively wiped out cumulatively around RO 475 million of value from the market capitalisation so far this year. This includes RO 459 million from the regular market, RO 19.6 from the parallel market, and RO 0.8 million from the ‘under-monitoring’ market.

“The recent decline in the market can be attributed to a multitude of factors, including and not limited to Moody’s rating action on Oman and some of the companies, the exit of investment by GCC and international investors towards other markets, companies going ex-dividend, and portfolio restructuring of local investors towards the GCC,” an explanatory note from the Research Department of U Capital said.

At current levels, the Oman market now stands at a nine-year low, said U Capital. The last time that the market came close to this level was in January 2016 when oil prices slumped to a low of $23.8 per barrel. Compared to other bourses in the GCC, the Muscat market was the worst performer after Dubai (-5.6 per cent YTD).

The average daily turnover fell 39.8 per cent to RO 2.8 million during January 1, 2018 — March 20, 2018 period versus the corresponding period of 2017. The average daily volume declined 27.4 per cent to 14.2 million shares during the period under review. Foreigners were net sellers of RO 6.17 million during the current calendar year. Foreign institutions were net sellers of RO 8.4 million, while foreign individuals were net buyers, amounting to RO 2.2 million. GCC investors represented 82 per cent of the net sellers followed by foreigners at 17 per cent.

“We believe the market has reached a bottom,” said U Capital’s Research Department. “Lately, we have witnessed various positive news flows on the economic level in terms of new oil and gas discoveries and the opening of new economic zones while the oil price is also comfortably placed as well and is higher on average by 20.5 per cent compared to average oil prices of 2017.”

It further noted: “We are also of the view that rating actions do cause short term hiccups, but other rating agencies earlier have been positive on the GCC including Oman. Earlier in 2018, S&P said that, after two years of significant pressure, S&P believes that barring unforeseen events, 2018 will mark the stabilisation of the financial profiles and performance of the GCC banks.”

With market at 4,781.9 points, the index price to earnings and price to book multiple now stands at 11.7x and 0.99x respectively, according to U Capital. Dividend yield of the market has climbed to 5.3 per cent.

“In terms of price to book, the market is attractively placed at second place after Bahrain and almost at third place after Bahrain and Dubai in terms of price to earnings. With the dividend season coming to an end, we estimate that market would bounce back soon on the back of quarterly results.”