Muscat – With an yearly gain of about 18 per cent in 2022, Oman’s Muscat Stock Exchange (MSX) has been the second best performing stock market in the GCC region.

The benchmark MSX30 Index was surprisingly resilient in 2022 – a year that saw high global inflation, rising interest rates, and food and energy crises caused by the Ukraine war.

During 2022, the Muscat Stock Exchange continued its positive trajectory from 2021 and closed higher for the second consecutive year after having fallen for four consecutive years previously from 2017 through to 2020.

The MSX30 Index closed 2022 up by 17.63 per cent year-on-year at 4857.44 points, while the MSX Total ‎Return Index was up by 23.38 per cent to close the year at 6194.67 points.

Amongst the sub-indices, Financial Index gained the most, closing higher by 20.15 per cent on year-on-year. Industrial Index rose 5.77 per cent and ‎Services Index closed down by 0.26 per cent. MSX Shariah ‎Index ended down by 4.99 per cent for the year.

Most GCC markets ended 2022 in the green territory on year-on-year basis, except Saudi Stock Exchange and Qatar Exchange.

Abu Dhabi Stock Exchange gained the most at 20.3 per cent year-on-year, followed by the Muscat Stock Exchange at 17.63 per cent, Bahrain market at 5.45 per cent, Dubai Financial Market at 4.39 per cent, and Kuwait Stock Exchange at 3.53 per cent. Saudi Stock Exchange closed the year down by 6.82 per cent year-on-year, while Qatar Exchange closed down by 8.13 per cent year-on- year, according to a research report from U-Capital.

‘As is the case ‎with its GCC peers, Oman’s economic prospects are closely tied to hydrocarbon prices, and this ‎correlation is also visible in the country’s stock market performance,’ U-Capital said in its report.

However, Oman’s economy is much more resilient now as compared to the time of oil price plunge during 2014-2016.

‘This is because of expedited efforts in lieu of Covid-19 pandemic to diversify government sources of revenue away from hydrocarbons. Further, the elevated hydrocarbon prices since 2021 have provided the much-needed windfall to support the government’s revenue diversification efforts. Oman’s economy continued the recovery path during 2022, supported by both the elevated hydrocarbon prices as well as non-hydrocarbon revenues like VAT,’ U-Capital said.

The report said that continued increase in economic activity has also positively impacted businesses and MSX-listed ‎companies have registered an increase of 9 per cent in their net profits during first nine months of 2022, largely supported by the financial and services sectors.

‘These developments ‎have resulted in the appreciation of the MSX30 Index which rose 17.63 per cent year-on-year,’ it added.

U-Capital analysis showed that 19 companies on the MSX have had share capital increases in 2022 with the total increase equal to about RO590mn. Out of these companies, 11 belong to the financial sector, seven to the industrial sector and one to the services sector. Two companies have had capital decreases during 2022.

Bullish outlook for 2023

The U-Capital report forecasts a positive performance for the Muscat Stock Exchange for this year.

‘Going into 2023, the Omani stock exchange is expected to continue moving in an upward trajectory, given the ‎expectations that the country’s economy will improve further, supported by government reform initiatives under the Medium-Term Fiscal Plan as well as elevated hydrocarbon prices,’ U-Capital said.

The report also noted that a flurry of initial public offering (IPO) activity is planned for the MSX in 2023. Government officials have been quoted as talking about Oman Investment Authority (OIA) taking up to 35 companies public over the next few years.

‘This initiative will not only support to expand the market’s economic sectors available for investment, but also increase the market’s capitalization,’ the report said.

U-Capital expects as many as three IPOs could be launched in 2023 by oil drilling firm Abraj Energy, industrial water services firm Majis and OQ Gas Network.

However, U-Capital noted that a global recession and geopolitical conflicts continue to remain high risks for the stock market outlook.

‘Lag effect of the rapid rise of interest rates in the region, mirroring the US Federal Reserve, could have an impact on credit growth and aggregate demand, as well as borrowers’ ability to pay off loans,’ the report added.