CAPITAL MARKETS

Oman 2019 | FINANCE | B2B

By improving corporate governance, boosting investor confidence, and working to incorporate SMEs into broader capital structures, Oman's capital markets are driving the Sultanate's long-term growth.

Abdullah Salim Al-Salmi
ABDULLAH SALIM AL-SALMI
Executive President
Capital Market Authority (CMA)
Dr. Ashraf Al Nabhani
DR. ASHRAF AL NABHANI
Chairman
Muscat Securities Market (MSM)

What are some of your core responsibilities?

ABDULLAH SALIM AL-SALMI The CMA's work involves both developing regulations and rules as well as assessing the sectors under our jurisdiction to promote development. In the developed world, regulators are regulators, whereas here regulators also help sectors to develop. As such, we work with the insurance industry and capital markets to spur their growth, while working to inform the public about how to best invest and participate in the economy's success. Confidence is an essential element in a market when investors seek to invest. This means confidence not only in the system that runs the market, but also in the companies listed on it. To this end, we introduced corporate governance; in fact, we were the first country in the GCC to do so in 2002. Since then, we have been educating companies on how to develop proper corporate governance, and recently started working on a new corporate governance code. In 2015, we established the Oman Center for Corporate Governance and Sustainability, which looks after the development and enhancement of corporate governance and educates the public and corporations. We also make sure the boards of directors on public companies are qualified, which significantly boosts confidence in the market and in the companies operating there.

DR. ASHRAF AL NABHANI The MSM index is composed of the 30 largest companies in terms of market capitalization and is primarily dominated by the financial sector with around 26%; followed by the services sector, which includes telecommunications, some ports, and power desalination plants, at around 19%; and industry, which makes up around 9% and includes industrial companies. In addition to market capitalization, liquidity is another criteria for companies to be included in the index. These companies are revised on an annual basis. In the last three years, as the market witnessed a general decline primarily because of oil prices, the composition of the index nearly remained the same because it was a general trend that affected the entire economy. The MSM Sharia index is composed of companies that are compliant with Sharia as per the Accounting and Auditing Organization for Islamic Financial Institutions' (AAOIFI) standards. AAOIFI is based in Bahrain and adopts accounting principles and standards for companies that abide by the principles of sharia. Generally, two main issues are examined: the financial structure of the company and the area of its production or services. When this index was introduced, it was primarily to create the supply for those who are interested in investing in sharia-compliant companies.

What path should future growth take?

ASAS Oman is working on its Vision 2040, which will be a turning point for the whole country. One of the major elements of this is to limit the role of the government in the operations of the economy and let the private sector take the lead. We see the emphasis on the private sector as a great chance for the capital markets to grow and play a larger role in shaping where the economy goes through the financing of innovative companies and projects. For insurance, we want it to grow alongside overall economic growth and activities, which will enhance the sector and make it more dynamic. The CMA will continue to do its part by encouraging growth in the private sector while also maintaining a robust regulatory and supervisory authority.

AAN When it comes to expanding coverage, MSM would like to see more listings. A privatization plan is required where government companies are floated to the public and listed on the exchange. Equally important, we would also like to encourage SMEs. Perhaps when proper SMEs enter the market, we can think of creating this SME segment in the stock exchange. SMEs typically do not have proper financial records and hence are generally not favored by banks, and the cost of funding through the banks is extremely high. It has to be noted that though funding is not the most important factor to promote SMEs, it is still required; as such, the capital market can play an important role in this endeavor.