Oman’s share index dipped 0.6% in June

Muscat: Oman’s benchmark MSM30 bourse fell 0.6 per cent month-on-month (MoM) in June after falling 2.2 per cent MoM in May, according to Global Research’s GCC Market Performance Markets July 2016 report.
The market started on a positive note, taking cues from its Gulf Cooperation Council (GCC) peers. However, after the first week, the market started falling gradually due to a lack of any positive catalyst. At the end of the month, the market reacted negatively to Brexit; and a sharp fall was witnessed in the market. However, it gradually recovered and the market registered gains of 6.9 per cent year-to-date, the report said.
Oman's government sold a $500 million six-year sukuk (government bond) in a private placement. The sukuk's profit rate was 3.5 per cent, and the ijara-structured instrument will be repaid in three equal instalments after the third year. Meanwhile, Oman raised a $2.5 billion two-part bond and a $1 billion loan from banks in January, 2016, the report pointed out.
Sectoral performance
In June, the Industrial sector (2 per cent MoM) was the sole gainer. Banking and Investment slipped (-2 per cent MoM) and the Services and Insurance sector also (-0.6 per cent MoM) ended in the red.
The Industrial sector rose on the gains in National Gas Co. (10.5 per cent MoM), followed by Raysut Cement Co. (8.3 per cent MoM), Al Jazeera Steel Products Co. (0.5 per cent MoM), and Al Maha Ceramics Co. (12.1 per cent MoM).
Services and Insurance ended in the red owing to the losses of Galfar Engineering and Contracting Co. (4.8 per cent MoM), Oman Telecommunications Co. (1.6 per cent MoM), and Phoenix Power Co. (3.2 per cent MoM).
Banking and Investment declined owing to the losses of the Sohar Bank (-2.3 per cent MoM), Bank Muscat (-3.6 per cent MoM), Global Financial Inv. Co. (-7.1 per cent MoM), and HSBC Bank Oman (-4.9 per cent MoM).
In June, trading on the MSM30 declined, with the overall volume traded falling 3.2 per cent MoM to 294 million shares. The turnover declined 27.5 per cent MoM to $0.2 billion.
Market capitalisation
In June, market capitalisation for the MSM30-listed companies was down 0.9 per cent MoM to $16 billion, with that of the top 10 listed companies falling 0.5 per cent MoM.
GCC markets
GCC markets ended on a mixed note in June on weak global cues and Brexit, which hurt market sentiments worldwide amidst a flattish oil price scenario. The KSE (-0.7 per cent MoM) was the top loser for the month and DFM also fell (-0.1 per cent MoM). The ADX (Abu Dhabi Index) was the top gainer for the month (5.8 per cent MoM), followed by the QE (Qatar Index) (3.6 per cent MoM), the TASI (Saudi Arabia’s Index) (0.8 per cent MoM), and the Bahrain stock market (0.6 per cent MoM).
The combined market capitalisation of GCC bourses rose 2 per cent MoM to $836 billion in June from $819 billion in May. The Saudi bourse contributed the most ($401 billion or 47.9 per cent) to the overall market capitalisation, followed by the Qatari index ($122 billion or 14.6 per cent), and the Abu Dhabi and Dubai markets ($199 billion or 23.8 per cent). The Kuwaiti, Omani, and Bahraini exchanges contributed $114 billion (13.7 per cent).
Trading declines
Trading activity slowed down in June, with the volume traded declining 17 per cent MoM to 12.6 billion shares and value traded falling 25.1 per cent MoM to $26.3 billion.
Brexit impact neutral
The much-awaited referendum on June 23, 2016, resulted in British citizens changing the course of the world’s fifth largest economy by voting to leave the European Union (EU). This shocked investors worldwide and its impact was recorded across global markets and currencies.
Global experts expect Brexit and consequent events to push the U.S. Federal Reserve to adopt a much more dovish stance, which would result in a delay in rate hikes.
Given the currency peg of GCC countries, such an event would be positive for these countries; as lower oil prices have resulted in slower growth for GCC countries, a lower interest rate would be conducive in such a scenario.
However, from the point of view of local banks, a delay/slower rise in interest rates would be considered a negative as this is expected to be the main catalyst for their earnings growth trajectory.
Given that GCC exports to the United Kingdom and the EU comprise mainly of oil and energy related products, any slowdown in these economies due to Brexit may pressure oil prices.
The UK remains among the top five buyers in Dubai’s property market. While asset managers and investors in the GCC region may witness their existing investments in the UK get devalued and/or yields eroded due to a weaker pound, softer prices and a cheaper currency offer an opportunity for investors. Additionally, the weaker currency is expected to adversely impact tourism as well given that British and European nationals are one of the top tourists in Dubai.