recent report by Bloomberg suggested that the Omani bourse was among the underperformers of stock markets globally, and the second worst performer in the Arab world during Q1 2019.
The MSM30 Index declined 7.4 per cent during the first three months of the year, eliciting a flurry of comments on social media.
The Bloomberg report also pointed out that the Ghana Stock Exchange was the worst performer in the world in Q1 2019, following a wave of selling of foreign shares that brought the index down more than 15 per cent in the first quarter.
Tunisia was second as the worst stock in the Arab world during the same period with a decline of 5.5 per cent.
However, this does not mean that the financial market in Oman is about to decline as some market observers suggest. The MSM decline can be attributed to market movements, but it does not mean that it is the worst performing in the region.
The securities market has provided cash dividends to shareholders, sometimes exceeding 10 per cent of net profit. The profit of listed companies amounted to RO 700 million ($1.8 billion) for 2018, representing a growth rate of 23 per cent compared to 2017.
The percentage of companies that achieved profits in the financial sector was 89 per cent, followed by the services sector (87 per cent), and industry 71 (per cent). These are good indicators but the daily decline of market movement is affecting the quarterly results.
The Bloomberg report is a reflection of a period in a region that still suffering the effects of the collapse in international oil prices, which began in mid-2014.
The region is also suffering the effects of conflict in Yemen, and the unilateral decision of the US administration to withdraw from the nuclear agreement with Iran, among other adverse developments.
However, financial analysts expect that the Sultanate and the rest of the region will witness a strong uptick in performance of stock markets in light of increasing world oil prices and other decisions that related to the local market.
Improving market trends and current stock valuations will help attract investors, especially as we approach the results for the first quarter of this year.
Also, the gradual rise in world oil prices over the past few months allows the government to spend more money on projects and programmes that have been slower in the previous period, which led to the contraction in growth and hurt the profits of some companies in the country.
At the local level, the MSM’s performance is linked to the confidence that domestic and foreign investors attach to the overall economic situation of the country.
They know very well that there is a deficit in the State’s financial budget, that requires more borrowing, which in turn requires funds to service this debt.
The investor also looks at the measures taken by the State in addressing the job situation, which also could affect the movement of the market. Also, international rating agencies sometime increase the suffering of the markets. In such challenging situations, solutions must be put forward and disclosed in order to boost investor confidence.
The State has to come forward with solutions and also shed light on the time required for these measures to take effect. Transparency is also key in bolstering market confidence. We hope that the MSM will witness a strong resurgence, supported by improved oil prices and government spending.
haiderdawood@hotmail.com
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