MARKET INVESTMENT

Oman 2018 | FINANCE | INTERVIEW

TBY talks to Dr. Ashraf bin Nabhan Al Nabhani, Chairman of Muscat Securities Market (MSM), on the evolution and maturity of the stock market, increased privatization initiatives, and plans to demutualize.

 Dr. Ashraf bin Nabhan Al Nabhani
BIOGRAPHY
Dr. Ashraf bin Nabhan Al Nabhani is a veteran in the field of finance and economics and holds a PhD in financial markets from the University of Cambridge. In addition to his role as the Chairman of MSM, he also holds the position of General Manager Corporate Support at Bank Nizwa. Prior to joining the bank, he was the Dean of the College of Banking and Financial Studies. His career spans decades of experience that includes positions at the Ministry of Finance & Economy, MSM, and the CMA. He played an instrumental role in setting up the Capital Market Authority.

How does the MSM work as a tool to help develop Oman's economy?

MSM is an integral part of the Omani economy. It was established in 1988 and has helped raise funds for many companies. Currently, the market capitalization of MSM is around OMR9 billion, with another OMR2 billion worth of bonds and sukuks. Leaving aside the bonds and sukuks, the value of shares are worth OMR9 billion, which is almost 35% of Oman's GDP. This is one of the indicators of the stock market's development. This is not as high as we would like, and there is still a great deal of room for the market to grow. This is especially the case with Tanfeedh. The government's ability to finance projects in the future will be limited due to the decline in oil prices, and these projects will require extensive investments in the markets, both foreign and local. The private sector will have an important role to play in the development of the economy by helping to establish the new companies that will be needed in Oman's next phase of development.

As new companies enter, how do you see the MSM 30 Index (MSM30) evolving?

In 2017, we anticipate some government companies will be privatized. There are a few companies that will come from the insurance sector. We are talking about five or six new companies that might be added to the list of companies in the market. The trading activity in the secondary market is related to the activity in the primary or IPO market. With an active IPO market, there will also be an active secondary market. There is a relationship between the two. This will help the market to improve its trading levels and increased demand will help the MSM30. There was a reduction of almost 32% in trading volumes of MSM during 2016 in comparison to the other Gulf countries that also saw reduction in their trading volumes ranging between 31% and 50% as all the Gulf markets fell in 2016 due to a substantial decline in oil prices. This was also the case in 2015. However, at current oil prices the reduction in the index and trading volumes has been absorbed by the market. I hope the privatization programs and new IPOs will give us new blood in the market and help boost trading. With Tanfeedh, we do not have enough information yet to know what financial structure these companies will have, but the market will be ready to adsorb these companies.

Where do you see the MSM in 2017-2018, and how do you plan on achieving this?

In the next few years we plan to demutualize. Currently, the stock market is a government entity. In 1998, when we established the Capital Market Authority (CMA) we separated the stock market, capital market, and the depository company. The stock and capital markets were government entities, with the depository company being owned 60% by MSM and 40% by the brokers. Now we plan to demutualize MSM and convert it into a company. We have to have the right infrastructure for the future. For example, in the Euronext model, there was the merger of the markets in Paris, Brussels, and Amsterdam followed by further expansion in other countries. They became bigger and more independent by having such a legal structure rather than being owned by the regulator. This is the CMA's and the MSM's plan for now. We have a consensus and initial approval, though the process will be lengthy because we have to go through various legal, parliamentary, and financial regulatory steps and consultations. It will be a kind of privatization program. The other important steps we are taking is enhancing our internal trading platform and making it bigger to accommodate future listings in the market and allow more brokers to be affiliated with our platform.