Jun 10 2012 |
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Bank Nizwa debut grabs market attention
Despite the caution prevailing in the regional and international markets on the back of the eurozone crisis, sovereign downgrades, decline in oil, and negative US economic data, the MSM30 index managed to register a 0.53 per cent gain last week (June 3-7) to close at 5,785.16.Strong local institutional support, which lasted for three consecutive weeks, propped up the market. HSBC Oman, Raysut Cement, Galfar Engineering and Shell Oman Marketing all pushed the index higher. The MSM30 was the sole weekly gainer among its GCC peers for the second consecutive week.
The Al Arabi Oman 20 index rose 0.09 per cent to finish at 1,031.60 with a turnover of RO10.52mn, while the Al Arabi GCC 50 index retreated 2.47 per cent to close at 938.14.
Also last week, the allotment procedure for the Bank Nizwa IPO and the refund of oversubscribed amounts were completed ahead of schedule.
Allotment was decided by the Capital Market Authority (CMA), as the first category (ceiling of 100,000 shares) was allotted up to 2,000 shares in full while the remaining were allotted around 18.45 per cent of the subscribed shares, while the second category (100,100 shares up to a maximum of 60mn shares) was allocated 4.8 per cent of the shares.
As mentioned in our latest report, much of the invested liquidity in the IPO might return to the market, or might be held back for upcoming IPOs. The IPO surpassed investor and analyst expectations as it was oversubscribed 11.14 times, and generated more than RO682mn, compared to the RO60mn offered.
The bank will hold its constitutive general meeting on June 21 to approve the Memorandum and Articles of Association, study the actions taken to establish the bank and approve the contracts and agreements.
The meeting will also review the auditors' report for the under-formation period, appointment of the first Sharia Supervision Committee and the election of the board of directors. We believe the debut of the shares (1.5bn in total) on the market today will provide momentum to trading. The share price will be floated for the first three days of trading.
Among the sub-indices, the Services index was the sole gainer soaring 0.97 per cent to close at 2,645, supported by oil marketing companies and Omantel. The Industrial index lost 0.72 per cent and closed at 6,902.37 as Voltamp Energy, Al Jazeera Steel Products, and A'Saffa Foods lost ground.
The Financial index dropped 0.21 per cent to finish at 6,657.83 on selling pressure in Bank Sohar and Ominvest, despite gains registered by HSBC Oman and National Bank of Oman.
At the beginning of the week, the Al Hassan Engineering stock lost 4.5 per
cent to touch its lowest level in a month, as company disclosure revealed that it may be required to reverse the revenue of RO1.3mn already recorded due to developments on a contract with PDO.
However, the shares recovered part of their losses and finished at 207bz as its subsidiary - Al Hassan Engineering Co Abu Dhabi LLC - was awarded a site-preparation contract worth US$1.94mn for the oil terminal at Hamriyah free zone by Sinopec International Petroleum.
Last week, local and GCC institutions net purchased RO46,000 and RO43,000, worth of shares, respectively. This helped offset selling pressure from local and GCC individuals.
During the week, the change of MSM constituents (effective July 1) controlled market movement. Five new companies were included in the index - Global Financial Investment, Al Maha Petroleum Marketing , Oman Oil Marketing, Oman Refreshment and Oman Fisheries.
Those exiting the index were Dhofar International Development, Dhofar Cattle Feed, Voltamp Energy, A'Saffa Foods and Oman United Insurance. The annual review of the index constituents takes into consideration the various sectors.
As a result, the number of securities traded on Global Financial Investment and Oman Fisheries Company rose 33.4 per cent and 26.1 per cent, respectively, accounting for 20.2 per cent of the total number of securities traded in the market during the week. Volumes and value increased 6.07 per cent and 11.15 per cent, respectively.
In a technical analysis, we maintain our recommendation that the index will range between its support at 5,730 and resistance at 5,800, while the trend will be supported by positive technical indicators.
Recommendation
We expect the GCC markets to witness more activity in the coming period, mainly in the IPO market. The MSM is only second to the Saudi market in terms of the number of IPOs in the offing.
Such IPOs will provide support to the markets, in addition to disclosures, tenders, and interim dividends (such as Omantel's). Liquidity will return to the market following the listing of Bank Nizwa shares, as new investors open investment accounts.
The revamp of the MSM30 index constituents will also support market activity, as changes come into effect next month. Investors and fund/portfolio managers will start restructuring their portfolios according to the index changes.
Focus will turn to heavy-weighted stocks which will support the upward market trend. We believe that corporate earnings in the second quarter will be much better than in the first quarter, backed by increased government expenditure, tenders and better performance indicators for banks and finance and service companies.
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