CAPITAL MARKETS

Oman 2020 | FINANCE | B2B

CMA and MSM are supporting Vision 2040 by providing financing to government companies that intend to go public, financing expansion of existing and new IPOs, and widening the investors base in Oman by enhancing and developing the investment funds and insurance industries.

Abdullah Al Salmi
ABDULLAH AL SALMI
Executive President
Capital Market Authority (CMA)
Ahmed Saleh Al Marhoon
AHMED SALEH AL MARHOON
CEO
Muscat Securities Market (MSM)

How has Oman's fixed income market performed in recent years?
ABDULLAH AL SALMI The local bond and sukuk market has grown tremendously since Islamic finance was instigated on December 18, 2012. As of December 31, 2019, the total outstanding market value of Oman's bonds and sukuk market is around USD10.2 billion, which represents 20.9% of the total market capitalization of the USD48.7-billion MSM. As of December 31, 2012, the total outstanding market value of the bonds market (with no sukuk issuance) in Oman was only about USD2.08 billion, which represented around 6.9% of the total market capitalization of the MSM. This translates to a remarkable annual growth in actual values of about 37.8% for the last seven years.

What is the key for MSM to position itself as a global investment destination?
AHMED SALEH AL MARHOON MSM is considered one of the safest and well-regulated markets in the region. MSM is a pioneer in corporate governance among its regional peers. In today's investment world, with the advent of securities governance regulations, transparency guidelines are a big factor for investor confidence. At MSM, we see all these aspects covered by clear guidelines for companies, which makes it easier for global investor to trust the market. In terms of our trading technologies, we have been using the advanced trading system from Euronext since 2006. We are also planning to upgrade to the Optiq trading system, also from Euronext. The inauguration of the new trading system will coincide with the introduction of a new surveillance system from First Derivatives. All of these are key to making MSM a desirable global investment destination.

What is the key to increasing the level of liquidity in Oman's fixed income market?
AAS CMA is working to improve ease of access and participation of foreign issuers and investors and widening the investor base in Oman by enhancing and developing the investment funds and insurance industries further. We are also aiming to increase and diversify the supply and issuance of fixed-income instruments in the market to reduce the scarcity of quality securities and passive investors who want to hold these instruments until maturity. To this end, we are also working to ensure that the issuance process for any fixed-income proposal is efficient, facilitative, and less costly. Finally, we plan to facilitate the introduction of risk management instruments such as forwards, futures, swaps, and option markets, which will help protect intermediaries and market players against adverse market movements in a fixed-income market.

What is the key to increase investors' appetite for capital appreciation strategies?
ASAM We can see investors prefer to hold their investment for a longer time, awaiting dividends. This trend has a negative connotation for MSM in that it increases the concentration of ownership, which in turn creates low liquidity in the market. Therefore, we are looking forward to seeing new IPOs coming about via the government and private sector, to offer more options to the market to ease liquidity and create more depth.

How can Omani capital markets further incorporate technological solutions and digitalization?
AAS Technological solutions and digitalization are critical to improving safety, efficiency, and market reach. We are pursuing further digitalization of the securities market, including the implementation of an eIPO mechanism in the issuance market. Moreover, we have upgraded the trading platform, and we are working on implementing the XBRL-based system in 2020 to report of financial and non-financial information by all issuers, and most importantly, perform analytics on digitalized data through a portal that would be available to investors. Finally, CMA also aims to set up a comprehensive program that will support nascent entrepreneurs to raise funds through crowdfunding or peer-to-peer financing and incubate them in an environment that will promote growth, high governance levels, and an entrepreneurial culture.

What main trends will affect the Omani economy in 2020?
ASAM The first major shift witnessed in the Sultanate was with the passing of His Majesty Sultan Qaboos bin Said Al Said, and the transition of power to His Majesty Sultan Haitham bin Tariq indicated a positive outlook embedded in the Omani tradition and culture that further boosted investor confidence and trust. For now, the main challenges are oil prices and the COVID-19 pandemic. 2020 will be a big year not just for Oman but the global economy. The third and most important trend to look out for is the failure of OPEC and non-OPEC allies to reach a mutual consensus.