Thursday, March 28, 2024 | Ramadan 17, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

MSM30 slumps despite upbeat economic and corporate profitability growth

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Despite an upbeat economic health outlook for the country coupled with corporate profitability growth in the recent half-year results, the market is nearing its 10-year low, which it hit in the financial crisis of 2008/09. We believe this all is due to the summer season because of which we have witnessed subdued trades along with volatile oil prices, which have made investors sceptical about future market movement and have forced investors to remain on the sidelines.


MSM30 ended the week down by 2.53 per cent on a weekly basis. The Financial Index was down (3.12 per cent), Industrial Index was down (3.23 per cent) while the Services Index also closed down by 0.96 per cent. The MSM Shariah Index closed down by 2.70 per cent.


Oman Tender Board met last week and approved RO 48.3m worth of projects, taking the total tenders awarded this year to date to RO 174.9m compared to RO 137.5m in the same period last year, growth of 27.2 per cent. Fifteen tenders were approved last week of which the biggest one was worth RO 36m for appointment of teachers for the colleges of technology of the Ministry of Manpower. This tender was second biggest tender of the year as well.


In the weekly technical analysis, MSM30 index broke down the first support level of 4,500 points this means that it will be move in downtrend channel. In the technical analysis, the MSM index is still moving in downtrend channel to reach the second support level at 4,336 points.


The last couple of years have been challenging for Oman’s economy and the same was felt by the real estate market in Oman as well. However, things have started to stabilise a bit. As an indication of the market trend, the total value of property transactions in the January-June period this year declined marginally by 0.4 per cent to RO 1.41bn, from RO 1.42bn in the same period of last year, according to NCSI. Although number of properties issued rose and number of sales contracts declined marginally, the number of mortgage contracts witnessed a sizeable decline of 18 per cent during the period. However, traded value of those mortgage contracts witnessed an increase of 15.3 per cent YoY during 1H18, indicating trades of big-ticket mortgages.


The fiscal deficit is projected to continue to narrow, from 9.3 per cent of GDP in 2017 to 4.6 per cent of GDP in 2018. With oil prices implied by futures markets declining over the medium-term, the deficit is then projected to widen. The current account balance is expected to be in a surplus of 9.3 per cent of GDP in 2018 as oil export revenues increase and remittance outflows remain subdued. The authorities are continuing with their fiscal reforms including through the introduction of the value-added tax and further energy price increases at the beginning of 2018. Reforms are also ongoing to improve the business environment, develop a more vibrant small and medium enterprises (SME) sector, deepen the capital markets, increase the involvement of women in the economy, and develop new industries with high potential for growth and job creation.


Qatar exchange topped the gainers as it was up by 1.99 per cent on weekly basis while Muscat Securities Market lost the most and was down by 2.53 per cent during the week.


Last week, Global equities index provider S&P Dow Jones announced that it will change the status of Saudi Arabia’s equity market to an emerging market in 2019. S&P DJI took the decision to upgrade Saudi Arabia’s standalone status “in response to recent positive market structure reforms to support foreign investment and a strong consensus among members of the investment community”. The classification change will become effective in two phases: from the beginning of March 2019, the quarterly rebalancing of S&P DJI and the second in the annual reconstitution of indexes in September 2019. S&P Dow Jones Indices is the third index complier to elevate Saudi Arabia’s market — FTSE Russell in March and MSCI in June did the upgrade earlier.


Also Last week IMF concluded its 2018 Article IV consultation with Saudi Arabia. IMF is of the view that, Real GDP growth is expected to increase to 1.9 per cent in 2018, with non-oil growth strengthening to 2.3 per cent. Growth is expected to pick-up further over the medium-term as the reforms take hold and oil output increases. Risks are balanced in the near-term. The employment of Saudi nationals has increased, especially for women, but the unemployment rate among Saudi nationals rose to 12.8 per cent in 2017. CPI inflation has increased in recent months with the introduction of the value-added tax (VAT) and higher gasoline and electricity prices, and is forecast at 3 per cent in 2018.


Globally, China’s 2Q’18 GDP growth met expectations. The country GDP went up by 6.7 per cent YoY slightly lower than 6.8 per cent in the first quarter of 2018 as Beijing has been cracking down on risky credit amid escalating trade tensions with the US. However, there was no surprise about this performance as US-China trade scuffles not yet impacted the country economy.[Courtesy: U Capital]


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