Low activity, foreign outflows hit MSM

MSM30 closed the week down by 1.79 percent. Trading activity was lower as turnover dropped by 19 percent while foreigners were net sellers of approximately $1 million.

All indices closed down led by Services Index (-4.12 per cent) followed by Financial and Industrial Index which were down by 1.54 per cent and 0.49 per cent w-o-w, respectively. Shariah Index closed down by 1.61 per cent during the week.

Muscat Securities Market announced the results of the annual review of the Shariah index sample. The modified sample will be in effect from Wednesday, May 20, 2020. The Sharia Index sample for 2020 includes 15 companies. These companies are Ooredoo, Bank Nizwa, Al Madinah Takaful, Al Jazeera Services, Majan College, Shell Oman, Oman Flour Mills, Oman Cables Industry, Salalah Port Services, Sahara Hospitality, National Biscuit, A’Saffa Foods, Al Maha Ceramics, Al Kamil Power and Oman Insurance Takaful. It is noteworthy that Oman Chromite Company left the Sharia index sample 2020 while Majan College entered the sample.

The CMA recently published the Insurance data for Oman for the first quarter of 2020. Gross direct premiums totaled RO 149.2mn during Q1 2020 compared with RO 152mn for the corresponding period of 2019. Insurance companies paid RO 48.8mn in net claims this year, an 11 per cent increase over RO 43.8mn in claims made in Q1 2019. Earned premiums climbed to RO 76mn, up from RO 75mn in Q1 2019. The first quarter of the current year witnessed a sharp decline in the demand for various insurance products. Life assurance and motor insurance fell 10 per cent. Engineering insurance decreased by 4.4 per cent and health insurance dipped 1 per cent.

CBO published the data of public finance for Oman. Oman reported surplus in the month of February 2020 at RO 38.3mn. However due to deficit of RO 344.4mn in the month of January, overall deficit in 2M-2020 stood at RO 306mn compared to surplus of RO 127mn in 2M-2019. Revenue during Jan-Feb 2020 stood at RO 1.39bn compared to RO 1.92bn last year, drop of 27.8 per cent. Expenditure dropped by 5.7 per cent to RO 1.69bn compared to RO 1.80bn last year.

As per Bloomberg, Oman’s repo rate (a target interest rate set by the central bank in its efforts to influence short-term interest rates as part of its monetary policy strategy) is stable at 0.5bps since the rate cut announced on March 18, 2020, as part of the stimulus package to fight the coronavirus. Under normal circumstances, Oman’s repo rate follows the trend of the US Fed funds policy rates due to the Oman’s currency peg to USD. As can be seen from the graph, Oman’s repo rate was already declining due to Fed funds rate cut announced in July’19 and with two emergency rate cuts announced this year.

Saudi Arabia announced a slew of austerity measures to cope with the fiscal impact of the coronavirus pandemic and oil price rout, tripling its value-added tax and cutting allowances for government workers. The steps taken to shore up revenue and rationalize spending are valued at about SAR 100bn ($26.6bn) in total. Shortly before the measures were announced, Riyadh ordered a payment of SAR 1.85bn to be distributed to state welfare recipients to mark the occasion of Ramadhan. The payments will include SAR 1,000 for each family and SAR 500 for each dependent.

Bahrain sold $2bn in a dual-tranche bond issuance comprising 4-1/2-year Sukuk, or Islamic bonds, and 10-year conventional bonds. They sold $1 bn in Sukuk at 6.25 per cent and $1 bn in 10-year bonds at 7.375 per cent, after receiving more than $11 bn in combined orders for the notes. It tightened its pricing after it began marketing the notes with an initial price guidance of 6.625 per cent-6.75 per cent for the Sukuk and around 8 per cent for the 10-year notes.

As per the latest data released by Central Bank of Qatar, Loan to Deposit ratio in Qatari Commercial Banks have risen to 121.5 per cent in March 2020 compared to 114.2 per cent in March 2019. Deposits of the commercial banks have risen from QAR 846bn to QAR 893bn, growth of 5.5 per cent. Meanwhile, loans have increased by 12.3 per cent during the period.

Oil prices continue to register gains supported by further voluntary production cuts amounting to 1.18mbpd announced by some of the GCC countries on top of 9.7mbpd announced internationally earlier. With various economies gradually loosening the lockdown we see recovery in oil demand to keep prices stable to higher in the coming period.

International markets dropped last week as investors grappled with downbeat remarks from the top-ranking Federal Reserve official along with worries over the market’s valuation. [Courtesy: U-Capital]


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