MSM finishes 2017 with 12% loss

Muscat - 

The Muscat Securities Market (MSM) recorded a sharp yearly decline for 2017 as the Omani economy witnessed a slowdown and the GCC financial markets struggled with negative sentiments due to geopolitical developments in the region.

The benchmark MSM30 index ended 2017 with a yearly loss of 11.82 per cent. However, the index rose more than one per cent on Sunday at 5,099.28 points.

All the sectoral indices also finished 2017 in red. Services stocks accounted for much of the market’s decline last year as the Services index fell 13.6 per cent. Financial index dropped 2.58 per cent while Industrial index recorded a yearly decline of 7.75 per cent. MSM Sharia index remained the worst performing index on the bourse with a decline of 17.88 per cent for 2017.

Cost control measures adopted by the government and subdued business environment from low oil prices along with increased operating costs in 2017 had its weight on the earnings performance of Omani corporates, Joice Mathew, head of equity research at United Securities, said.

“Lower government spending on infrastructure projects, coupled with policy changes such as increase in corporate tax rates and utility prices resulted in companies reporting lower profitability in 2017,” he said.

Despite the weak performance of the market, the capitalisation at the MSM grew in 2017, mainly due to the listings of new companies, rights issues and government and corporate bonds on the bourse. Total market capitalisation rose 3.83 per cent to RO17.95bn at the end of 2017 from RO17.28bn a year ago. Market turnover increased 3.53 per cent to RO993mn at the end of 2017 from RO959mn a year ago.

Rising geopolitical risks has impacted the way Middle Eastern investors react to oil prices, making shares in the GCC markets the most negatively correlated with crude since 2014, according to a Bloomberg index of the region’s major indexes. The stock gauge fell about three per cent in 2017 even after crude prices recovered to the highest level since 2015, Bloomberg reported on Sunday.

Omani investors were net buyers in 2017 while GCC and other foreign investors remained net sellers for the year. The net foreign investment on the MSM fell 8.2 per cent in 2017.

“We believe the level of economic activity in Oman will improve in 2018 along with increase in oil prices. Higher oil price should give the government confidence to resume development activities and infrastructure spending, which will have a positive bearing on the private sector. In the absence of further budget tightening by the government, we feel that the corporate earnings growth should revive in 2018,” Mathew added.

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