MSM30: Trading improves amid external pressures

The local financial market shared with its regional counterparts the external pressures related to the decline of the Turkish lira and the preventive tariffs between the United States and China, in addition to the geopolitical tensions already existing in the region. MSM30 ended the week lower by 0.92 per cent at 4,390.45 as well as all sub-indices of which led by the Financial Index (-0.99 per cent) followed by the Industrial Index (-0.51 per cent) and finally the Services Index (-0.4 per cent). The MSM Shariah Index closed down by 0.13 per cent on weekly basis.
Energy Sector total revenues stood at RO 323.74 million for 1H’18, down by 2.4 per cent on yearly basis. Out of 12 listed companies within the sector, 5 companies did decline in revenues led by the Oman National Engineering and Investment Co Sector’s operating profit posted a year decline of 7.4 per cent at RO 84.7 million with a profit margin of 26.2 per cent versus 27.6 per cent for 1H’17. However, the better performance was seen at the net profit level as total sector net earnings came at RO 36.1 million up by 118.3 per cent. This was mainly due to adjustment in deferred tax liability recorded in 1H’17 as a consequence of the rate increase in corporate income tax which was effective from start of 2017.
The Omani leasing sector reported a total revenue of RO 33.49 million for the first half of FY18, down by 1 per centYoY as compared to the same period last year. Furthermore, the sector reported a total net profit decline of 20 per cent YoY to RO 11.13 million, on the back of higher provisions made by some companies. NFCI, which contributed 42 per cent to the sector revenue for H1’18, grew its revenue by 3 per cent YoY. However, its net profit was almost flat year-on-year on higher costs. TFCI and MFCI, which both contributed 15 per cent each to the sector revenue of H1’18, grew their revenue by 5 per cent YoY and 4 per cent YoY respectively. However, both companies reported declines in net profit of 43 per cent YoY and 18 per cent YoY respectively. UFCI and AOFS (second-largest by revenue) posted revenue declines of 13 per cent YoY and 12 per cent YoY, with AOFS’s net profit declining by 24 per cent YoY and UFCI’s net profit declining by 76 per cent YoY.
In a positive move to reduce uncertainty in the market, the CMA has requested the banks which are involved in merger negotiations to make their final decision on proposed mergers within a six-month period after the initial disclosure. In this regard, the CMA, in respective letters written to the banks, has requested Bank Dhofar and NBO as well as OAB and Alizz Islamic Bank to complete the negotiation process and make final decision on their proposed mergers within a period not exceeding six months from the announcement of first disclosure.
Statistics published by the National Centre for Statistics and Information revealed that number of building permits in Oman for 2016 (including residential, non-residential, mixed either new and modified) came at 29,714, a decline of 22.5 per cent on annual basis. Residential permits formed 81.3 per cent of the total permits followed by non-residential (11.6 per cent) and mixed use (7.1 per cent).
Abu Dhabi Securities Exchange was the only gainer in the last week as it closed up by 0.72 per cent while Qatar Exchange was the worst performer closing down by 4.44 per cent on weekly basis.
UAE Securities and Commodities Authority (SCA) recently announced new rules regarding loss making companies listed on its exchanges. Loss-making companies listed on the Dubai and Abu Dhabi stock exchanges could be moved to a secondary category market if their reported losses are 50 per cent or more of their total capital, according to a proposal posted by SCA. The company which in its periodical or annual financial statements show that the accumulated losses have reached a percentage of 50 per cent or more from its capital should immediately disclose to the authority and the market. The market will commit to transfer the listing of that company to the secondary category. The SCA proposal document also stated that companies listed on the UAE exchanges that report losses of either below 30 per cent, between 30-50 per cent or 50 per cent and above will have to immediately disclose that to the authority and the market. In addition, the SCA document said any company impacted by the rules must outline the reasons behind the losses and will be given 45 days to present the SCA with a restructuring plan to turn the business around.
With over 50 per cent fall in Turkish Lira against US Dollar, we believe countries around the world would be witnessing troubling times regarding their exposure to the currency. Although the amount of investment is not disclosed, however, as per Turkish Ministry of Trade, as of 2017, 2131 companies from GCC have a presence in Turkey and are exposed to the Turkish Lira. Saudi Arabia leads with as many as 1,138 companies followed by 461 companies from UAE, 314 companies from Kuwait and 131 companies from Qatar. 65 Bahraini and 22 Omani companies have exposure to Turkish Lira as well. Gulf countries have been active in Turkey’s real estate boom. Over the past two years, GCC citizens have been among the most active in Turkey’s real estate market. GCC citizens purchased over one-fourth of all properties sold to foreigners in 2017. Most of the companies established by GCC are in real estate and construction sector. Around 689 companies amongst 2131 are in real estate (379) and construction (310) sector, 32 per cent of the total. (Courtesy: U Capital)