Muscat Securities Market records worst annual loss since 2011

January 01, 2019

Affected by everything from volatile oil prices, emerging markets turmoil, regional geopolitical developments, US-China trade dispute and US Fed rate hike, the year 2018 was one of the toughest years for the Muscat Securities Market (MSM).

The benchmark index of Oman’s stock market ended the year down 15.2 per cent – the biggest loss since 2011. The MSM30 index fell 0.41 per cent at 4,323.74 points on Monday as 2018 came to a close.

“The global trends had an impact on overall liquidity in addition to Oman’s market specific issues. The US Fed rate hike, new trade barriers and the regional geopolitical issues all had a variable degree of impact on the local market in 2018,” Sameer Kattiparambil, vice president – equity research at EFG-Hermes Oman said.

Despite the worst annual decline in many years, market capitalisation at the MSM increased 1.26 per cent to RO18.17bn at the end of 2018, mainly due to listings of new companies, rights issues and government and corporate bonds on the bourse.

“Investors were somewhat waiting for a stable oil price before entering the market. However, with a renewed oil price volatility these investors became more hesitant to enter the market,” Kattiparambil said.

The Muscat Securities Market was the second worst performer in the GCC after Dubai Financial Market, which lost about 27 per cent in 2018.

‘Going forward, the trading activity within the regional markets is likely to track the sentiments in global markets as well as the movement in oil prices, which continues to influence the performance of regional economies’, Dubai-based Allied Investment Partners PJSC said in a report.

Trading activity at MSM remained weak throughout the year as the average daily turnover was 23.2 per cent lower at RO3.08mn in 2018 compared to RO4.02mn in the previous year.

Kattiparambil said that oil price stability above the break-even levels is crucial for Oman. “In addition, higher investment spending in 2019 and its execution would drive the market sentiment, in our view.”

At the MSM, Omani investors were net buyers in 2018 while GCC and other foreign investors remained net sellers for the year. Net foreign investment on the Omani bourse fell 21.2 per cent in 2018.

“There has been an unprecedented volatility in oil prices in 2018, and corporate profitability came under pressure due to the challenging business environment. These factors adversely affected Oman’s market. We are expecting oil market to rebalance in the coming quarters,” Suresh Kumar, head of research at Al Maha Financial Services said.

“Going forward, we do not expect any substantial deterioration in corporate earnings, there could be a modest growth in corporate profits for 2019. This can result in a gradual improvement in the market this year,” Kumar added.

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