Several factors weigh on MSM performance

Trades continued to be weak attributable to several internal and external factors including news related to an MoU regarding the Third Mobile Operator which impacted the telecom sector. Oil prices and the China-US trade war also weighed on sentiment.

The MSM30 ended the week down by 2.56 per cent at 3,863.28. All sub-indices closed down led by the Services Index (-2.58 per cent) followed by the Industrial Index (-2.46 per cent) then the Financial Index (-1.13 per cent). The MSM Shariah Index closed down by 2.67 per cent w-o-w.

The Tender Board awarded Galfar a tender for addition of two lanes to dualisation of Al Rusail – Nizwa road at a cost of RO 86.28m. This is the fourth tender awarded to Galfar this year. New contracts awarded to Galfar in 2019 amounted to RO 116.5m.

Ominvest in its recently published quarterly report wrote that the discussions for a potential merger between Oman Arab Bank (OAB) and Alizz Islamic Bank are progressing well. A memorandum of understanding (MoU) has been signed and the regulators have granted initial approvals to proceed with the process. The banks are currently engaged in the due diligence exercise. Oman Arab Bank reported net income of RO 7.2m in 1Q19 while Alizz Islamic Bank reported profit of RO 0.45m in 1Q19.

MSM revised the list of companies in the Shariah index. Overall 15 companies now comprise the index. Inclusion: Sahara Hospitality and National Biscuit Industries have been included in the Index, while Al Maha Ceramics and Oman Chromite have been excluded.

Last week, Raysut Cement affirmed its intent to acquire 100 per cent stake in Sohar Cement Factory. The Sohar Cement Factory is located in Suhar and has a capacity of 1.7m tonnes of cement. Sohar Cement came into operation this year and is Sultanate’s third cement mill after Oman Cement and Raysut Cement.

In the weekly technical analysis, still the MSM 30 index move in the downtrend channel we expect this week the index will touch the level of 3,845 points, currently the index crossed down the moving average of 50 days, which will make more pressure to the market.

In the previous week we also witnessed announcement of the third operator in Oman. The Telecommunication Regulatory Authority confirmed that a memorandum of understanding has been signed between the company owned by the local investment funds and between Vodafone (as a strategic partner) in a move to complete the procedures for obtaining the third operator license to provide mobile public telecommunications services in the Sultanate in accordance with the directives of the government in this regard. We believe with Vodafone signing a market agreement to support the launch of an operator in Oman, this would typically mean that there will be no investment from Vodafone and they would only provide strategic direction and will be involved in branding, technology and operational support. We believe the entry of a third operator will impact the revenues of existing telcos over the period of time.

As per CBO’s latest statistical bulletin, the total credit of the Omani Banking sector (conventional loans and Islamic financing) stood at RO 25.29bn as at the end of Feb’19, up by +6.2 per cent YoY and +0.7 per cent MoM. Total deposits stood at RO ‎‎22.69bn, up by +3.0 per cent YoY and +0.5 per cent MoM. Total Loan-to-Deposit Ratio increased to 111.5 per cent in Feb’19 from 107.8 per cent in Dec’18. Conventional banks account for 85.4 per cent of total system credit at RO 21.61bn as at the end of Feb’19,

rising by +4.1 per cent YoY and +0.6 per cent MoM. Credit extended to the private sector grew by +2.1 per cent YoY and +0.6 per cent MoM. Conventional deposits at RO 19.36bn (+2.8 per cent YoY, 0.2 per cent MoM) form 85.5 per cent of the total banking deposits of Oman.

[Courtesy: U-Capital]