MSM gets National Day present of RO150 million
World news agencies reported yesterday that Oman's minister of commerce and industry, Maqbool Ali Sultan, had announced a RO150 million (US$389 million) bail-out of the Muscat Securities Market (MSM), Oman's stock market.
The value of the MSM index has fallen from 11554.69 points at the end of May 2008 to 5,846.19 on November 17th.
In October, Mr Sultan had attempted to allay fears of a financial meltdown, reminding his listeners that Oman had one of the best-performing markets in the Gulf countries, even though it is the smallest bourse, and that the 'earning per share is slightly less than 9 per cent.'
Furthermore, "profits had grown by more than 42% in the third quarter of this year. Listed companies had achieved 54 per cent growth or RO411 million profits during the first half of this year against RO266 million in the same period last year."
At the end of March this year, 30% of stocks were owned by foreign investors. These investors have retreated and the loss of confidence has been contagious. Even successful companies such as Galfar Engineering and Renaissance Services have not been immune from selling.
The Omani government is putting in 60% of the bail-out funds while the private sector and pension funds are contributing the remaining 40%. The objective is to buy up shares that no-one else wants to buy, in a bid to stabilise the market.
Care will be needed in deciding when it would be appropriate for the fund to resell the shares it has bought back to the market, in order to avoid another downward spiral in prices. The question remains as to whether the move was in response to broad market conditions or as a result of pressure from small investors.
The market gained three percent once the news had been announced.
Oman's fund is modest. Kuwait's sovereign wealth fund is to pump at least 1billion Kuwaiti dinars into Kuwait's stock exchange over the next five years, while the "Qatar Investment Authority said last month that it would buy between 10 per cent and 20 per cent of banks’ shares on the Qatar bourse, at a cost of about $5.3bn."
The value of the MSM index has fallen from 11554.69 points at the end of May 2008 to 5,846.19 on November 17th.
In October, Mr Sultan had attempted to allay fears of a financial meltdown, reminding his listeners that Oman had one of the best-performing markets in the Gulf countries, even though it is the smallest bourse, and that the 'earning per share is slightly less than 9 per cent.'
Furthermore, "profits had grown by more than 42% in the third quarter of this year. Listed companies had achieved 54 per cent growth or RO411 million profits during the first half of this year against RO266 million in the same period last year."
At the end of March this year, 30% of stocks were owned by foreign investors. These investors have retreated and the loss of confidence has been contagious. Even successful companies such as Galfar Engineering and Renaissance Services have not been immune from selling.
The Omani government is putting in 60% of the bail-out funds while the private sector and pension funds are contributing the remaining 40%. The objective is to buy up shares that no-one else wants to buy, in a bid to stabilise the market.
Care will be needed in deciding when it would be appropriate for the fund to resell the shares it has bought back to the market, in order to avoid another downward spiral in prices. The question remains as to whether the move was in response to broad market conditions or as a result of pressure from small investors.
The market gained three percent once the news had been announced.
Oman's fund is modest. Kuwait's sovereign wealth fund is to pump at least 1billion Kuwaiti dinars into Kuwait's stock exchange over the next five years, while the "Qatar Investment Authority said last month that it would buy between 10 per cent and 20 per cent of banks’ shares on the Qatar bourse, at a cost of about $5.3bn."
Comments
omanymous wrote:
11/22/08 07:23:44
newsbriefs wrote:
Gulf News reported on 4th December 2008 that the Central Bank of Oman has 'amended bank reserve requirement rules to release 270 million riyals (Dh2.57 billion) into the banking system to help lenders cope with the financial crisis.' http://archive.gulfnews.com...
12/05/08 13:05:22
Some of the retreat was due to worrying results trend from leading companies. Not all earnings are seasonal, so if one disects Q-o-Q results as opposed to Y-o-Y, a not so fantastic picture emerges for the likes of Galfar, Omantel, Raysut ... etc. True, the global economic woes exacebrated the fall. However, if one looks at valuations of leading listed companies in MSM and compares them to some GCC markets then MSM will not be the most attractive play for some local and foreign investors. Meaning, the announced fund will not necessarily bring a crowd along with it, except for short term speculation - and we know what that does.
Intervention doesn't always work. There was some visible support for Omantel shares over the past few weeks yet it keeps trending down no matter what. It will be interesting to see whether this fund stabilises the market.
The real estate sector will be the key for the economy in the coming period and as a result I expect this fund announcement to be the final card played by the government in the stock market. Future liquidity provisions will have to be allocated elsewhere, be it real estate or industry.