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Corporate results weigh on MSM performance


The MSM30 ended the previous week on a decline note by 1.25 per cent at 5,024.06 mainly on weak companies’ results, investors’ cautious sentiment and thus moderate liquidity. All sub-indices closed down led by the Financial Index (-1.87 per cent to 7,401.20) then the Industrial Index (-1.29 per cent) the Service Index (-1.14 per cent). The MSM Shariah Index closed down by 0.06 per cent.

The listed companies have published their initial yearly results for 2017 (for the companies whose financial year-end in December). The total net earnings for the market stood at RO 514 million down by 18.3 per cent. Main reasons for the drop are linked to higher operating expenses, taxes, adjustments to the deferred taxes, royalties and competition. Number of companies that were in loss in 2017 stood at 21, as per available data. Sector wise, the Industrial Sector registered the highest decline by 60.8 per cent to RO 25.5 million on weaker results by cement companies, Al Hassan Engineering and Oman Cables Industry Co.

The service sector saw also a notable decline as its companies total net earnings went down by 43.9 per cent on yearly basis (i.e. RO 63.2 million) to RO 80.6 million for 2017. More than half of this drop is caused by the Energy sector as its companies results were impacted by adjustments to deferred taxes due to the rise in tax rate. Omantel has not yet announced its initial results so far. As per disclosure on the MSM website, the company is waiting for Zain group results in order to consolidate them as Omantel already completed the acquisition of 21.9 per cent in Zain group in 2017. Such a step is material to Omantel results according to the disclosure. The Financial sector net earnings were only down by 2.9 per cent on yearly basis at RO 407.9 million. Banks cumulative results were stable, insurance companies were good (including new four listed companies which we took into account also the 2016 figures), but Investment and holding companies results have declined.

In the weekly technical analysis, the movement of MSM index was very close to touch the first support level at 5,000 points as we mentioned in our previous report. Currently technical analysis indicates that if the MSM index breaks this level it will move towards the second support level at 4,960 points. While closing the index and stabilise above this level will push the index to touch 5,120 points again.

Oman’s sovereign wealth fund is planning to start a $1bn infrastructure fund to boost investment in projects including the Gulf state’s road, transport and energy systems. The State General Reserve Fund is talking to international banks and potential investors for the financing. We believe Oman will continue to explore ways either through foreign direct investment or through new funds, to diversify the Sultanate’s oil-dependent economy and boost returns from other sources and we will see more and more announcements in the coming days.

Latest CBO data indicates that the weighted average interest rate spread (lending rate minus deposit rate) on Omani Rial has increased by 1.8bps on month-to-month basis, at 3.538 per cent for the month of Nov’17, on account of a higher lending rate (5.215 per cent), in spite of an MoM increase in deposit rate which averaged at 1.677 per cent. However, RO spread is still 10bps below Nov’16 level. Weighted average FCY spread rose by 8.9bps in Nov’17 (at 2.843 per cent) over the previous month. The spread is higher by 53.5bps when compared to Nov’16.

Weighted average interest rate on private sector RO time deposits remains stable around 3.6 per cent over the last 3 months. Weighted average interest rate on all private sector deposits (RO) also continues to remain stable around 1.30 per cent over the last 3 months.

Saudi Stock Exchange topped the GCC financial markets gainers closing up by 2.74 per cent on weekly basis while the Muscat Securities Market was the only loser with a decline of 1.25 per cent.

In the UAE, Securities and Commodities Authority (SCA) has cancelled the condition stipulating that listed shares of dual listed companies in the UAE markets should not exceed 30 per cent of its capital. This move comes as part of the UAE plan to attract more of such type of companies. However, as per the resolution, the company must have been established for at least two years and has issued at least two audited budgets. On the other hand, companies in which 25 per cent of shares are owned by the government are exempted from this condition.

The Saudi Arabian Monetary Authority raised the banks mortgage loan limit up to 90 per cent, from 85 per cent of the total value of unit value for Saudi first-time buyers. The move was introduced this year again alike last year when SAMA raised housing loan limits to 85 per cent from 70 per cent. We believe the move aims to spur growth in the home mortgage sector and achieve the housing objectives under the Saudi Vision 2030. It will also enable banks and home financiers to increase real estate loans and meet growing market demand. (Credit: U-Capital)

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