July 16-August 15

The MSM's banking and investment index outperforms other sectoral indices on the back of solid first-half results
Gulf Investment Services

The earnings season kept the market ticking, with the benchmark MSM30 Index gaining 5.2 per cent at 6,730.13 during the period under review. On August 12, continued buying interest spurred the index to an all-time high of 6,793.91. The gains translate into year-to-date returns of nearly 20 per cent. Among the sectoral indices, banking and investment leaped ahead of the industry index in terms of year-to-date returns, with returns on the former working out to 30.64 per cent as compared to 23.15 per cent for the industry index.

During the first half of the year, aggregate revenue for the MSM30 Index constituents saw a growth of 23.5 per cent, while net profits jumped by 32.1 per cent. Corporates across all sectors witnessed healthy growth in core and non-core operations. Among sectoral indices, the banking and investment index registered the highest earnings growth of 48.8 per cent, industry index registered 26.8 per cent, while the services and insurance index constituents saw a jump of 17.3 per cent.

Banks posts vibrant growth
On the monetary front, broad money (M2) has registered a growth of 32 per cent to reach RO5.241bn in June. Provisional figures of banks' net profits after provision and taxes stood at RO91mn for the first half, according to the Central Bank of Oman (CBO). On the interest rate front, the weighted average of 28 days CBO Certificates of Deposit rate in June stood at 3.565 per cent compared to 3.901 per cent a year ago. The average rate for repos during the same period stood at 6.320 per cent and 6.204 per cent, respectively.

BankMuscat has proposed to raise its capital through private placement to Dubai Financial Group. We expect this development to be positive for the bank.

Outlook remains positive

during the recent past with reducing risk appetite among the investment community. This was fuelled by a weakening credit market. Meanwhile, all regional indices in the GCC have turned positive in terms of year-to-date returns. Healthy macroeconomic fundamentals and diminishing impact of losses from market investments have attracted global and local investors.

The sultanate, in particular, continues to be attractive given the higher level of transparency in corporate disclosures and market efficiency. Liquidity on the MSM should also improve as new IPOs hit the market. Galfar Engineering and Contracting Company is expected to list on October 24. The enhanced market capitalisation will also give investors an opportunity to invest in the company, which is among the largest of its kind in the sector in the region. We remain positive on fundamentally sound sectors like banking, cement, oil marketing and select industry sector companies like Al Anwar Ceramic Tiles, Oman Cables and National Aluminium Products.

Disclaimer: This report has been prepared on the basis of publicly available information, internally developed data and other reliable sources. Care has been taken to ensure that the facts stated are accurate and the opinions given are reasonable, but GIS or any employee shall be responsible for the contents of this report.