BOURSE TRADING

Oman 2015 | FINANCE | REVIEW: CAPITAL MARKETS

Its benchmark MSM-30 index having closed 2013 on a six-year annual high, the Muscat Securities Market continues to power ahead and welcome new listings.

The Muscat Securities Market (MSM) was established by the Royal Decree (53/88) of 21 June 1988, and structurally reformed a decade later by two Royal Decrees (80/98) and (82/98). The former resulted in a new Capital Market Law stipulating the establishment of the separate entities of the exchange MSM itself, and the market regulator, the Capital Market Authority (CMA). For optimum efficiency and foreign investor service, clearance and settlement is realized through a settlement bank (the Central Bank of Oman [CBO]) and a Settlement Guarantee Fund (SGF), the latter stepping in to close any shortfall in settlement amount from an intermediary for seamless, and secure, trading. The exchange currently hosts over 120 listed stocks, the trading of which is executed from 10:00 to 13:00 daily excepting Fridays and Saturdays. The MSM is a soundly regulated and transparent bourse operating an advanced electronic platform, as confirmed by ISO 9001:2008 certification for the “Trading of Securities," and ISO 27001:2005 certification for “Information Security Management Systems." According to the World Bank, the market capitalization of listed companies in Oman as a percentage of GDP in 2012 was 25.68%. Elsewhere, For 2013, the overall number of bonds traded soared 830% to OMR214 million from OMR23 million a year earlier. Turnover in 2013 was at OMR 2,208 million, up 115.4% YoY, while market capitalization was at OMR14.16 billion, up 21.35% YoY.

SMEs

In a TBY interview Abdullah Salem Al-Salmi, Executive President of the CMA explained the MSM's new SMS platform initiative. Accordingly, SMEs are not to be listed on the main bourse, but rather on a series of specialized markets to support the development of those enterprises contributing to overall Omani growth. The idea is to get SMEs listed and regulated by the CMA, “…thereby gaining credibility among creditors, vendors, and clients. We know funding for SMEs does not have to come from the capital markets because their required funding may be limited in some cases, but they need this sort of inclusion."

AN INDEX OF POSSIBILITIES

The benchmark Muscat Securities Market Index (MSM 30 Index) was established in 1992, with a base date of June 1990, and comprises the 30 most liquid companies. The MSM 30 Index closed 2013 at 6,834.56 points, up 18.64% on 2012, marking a six-year annual high on its second consecutive annual rise following the 2011 decline of 15.7%. Trading value hiked 111.6% to OMR2.3 billion from 2012's OMR1.07 billion. Turnover for 2013 was at OMR2.2 billion on a YoY climb of 115.4%. Market capitalization saw a double-digit YoY rise of 21.4% to OMR14.16 billion from OMR11.67 billion. The index saw an annual peak of 6,926.56 points on August 20, 2013, and troughed at 5,760.73 points on January 1, 2013. In value terms, the highest of the year was OMR33.6 million registered on December 17, 2013, with the low of OMR1.96 million following on January 27, 2013. Meanwhile, the average daily trading value for 2013 climbed 114.2% YoY to OMR9.17 million from OMR4.28 million in 2012. As the MSM points out, “it is worth mentioning that the number of listed securities reached 136 during 2013, around 116 of which were listed joint stock companies, 18 bonds, and two funds." For FY2013, the prices of 83 equities rose, while 27 declined and 10 were unchanged YoY.

For the month of October 2014, the MSM 30 Index shed 509.55 points, or 6.81% to close at 6,974.62 points. Meanwhile, the MSM Shariah Index closed at 1,041.71 points, down 4.2% MoM to 1,041.71 points. The monthly trading value lost 5.8% to OMR149.29 million MoM. The daily average was OMR9.33 million, while the number of trades fell by 8.65% to 22,518 trades compared to 24,651 trades during last month. According to official data, for October 2014 the top-five stocks by value were Oman Telecommunication (14.35), Bank Muscat (14.26%), Al Anwar Holding (12.73%), Taageer Finance (9.27%), and Ooredoo (5.37%), with all other companies on 44.1%. Sector-wise, market capitalization for the month was split into financial (39.9%), services (33%), industrial (16.7%), and bonds (0.3%). Meanwhile, as of November 4, the overall market capitalization of the MSM stood at $26.26 billion.

MEET THE BROKERS

At present, 21 brokerage firms operate at the MSM, where United Securities, Gulf Baader Capital Markets, and Global Securities Market were the largest by market share in Jan-Oct 2013 on a respective 13.8% (20.64% for October 2014), 10.65% (12.99%), and 10.24% (6.7%). For the month of October 2014, the buy-side value of trades for the same three firms was OMR62.2 million, OMR39 million, and OMR20.3 million.

FOREIGN PARTICIPATION

The MSM incentivizes foreign participation by, among other provisions, charging no tax on capital returns or profits, by imposing no limits on capital and profit transfers, and through the convertibility of the Omani rial and fixed exchange rate with the US dollar. For October 2014, foreign nationals accounted for 13.6% of financial sector trades, 9.9% of industrial sector trades, and 12.4% of services sector trades, making a total of 35.9%.

IPOs

Fresh blood has continued to arrive on the MSM. Yet according to MSM Director General Ahmed Saleh Al Marhoon in conversation with TBY, “IPOs are our main weakness here in Oman. We are probably one of the best-regulated exchanges in the region, and [this] is not because of the rules and regulations, but only because the depth of the market is not attracting more foreign investors." He also confirmed that “the CBO will also not allow any bank to be established without it being listed as a public company." Additionally, Omani regulations stipulate that power plants majority-owned by foreign investors become listed on the MSM within five years of commencing operations. The shares of Omani power firms Al Suwadi Power Co (ALSP) and Al Batinah Power Co (ALBP) commenced trading in late June of 2014 following hugely oversubscribed IPOs. Both entities had offered 35% stakes in offerings together worth $162.9 million, according to Reuters. Al Suwadi Power Co saw subscriptions worth 10.5 times the target amount, while Al Batinah Power Co's offering was covered 5.6 times. Both energy enterprises opened shop in April 2012.

On November 3, the shares of Al Maha Ceramics (AMCI) debuted at the MSM, posting a lofty gain of close to 69% on flush interest from institutional and retail investors. The stock, which opened trading at OMR0.640—over 61% of face value—closed the day at OMR0.672. Al Maha Ceramics had offered 20 million shares at OMR0.397 each at IPO, divesting approximately 40% of its OMR5 million in paid-up capital.

WATCHING THE NEIGHBORS

Over 2013, the MSE ranked sixth out of the seven GCC markets in terms of benchmark index rise, up 18.6% YoY, ahead of the Bahrain bourse, up 17.2%. The top-three performers were the Dubai Financial Market (107.7%), Abu Dhabi Securities Exchange (63.1%), and Kuwait Stock Exchange (27.2%). Meanwhile, the average growth for GCC exchanges in 2013 was 40.5%, and for non-GCC Arab markets it was at 5.8%.

THE GREEN WINDOW

On July 1, 2013, in step with the growing trend for sharia-compliant financial instruments, the MSM launched the MSM Sharia Index, featuring 32 joint stock companies compliant in business practice with sharia law. It was the last market in the GCC to do so. The index is to be reviewed quarterly to assess continued compliance by existing members, and to remove errant entities, or usher in new ones. As of end-2013, the index was at 1,099.68, up from the 9M2013 level of 1,048.83.