Jun 30 2012 |
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Improved trading activity lifts MSM
Even as the MSM benchmark index approached its immediate resistance level of 5,700, following two weeks of selling pressure, improvement in trading, especially during the final days of last week, helped the index gain 0.43 per cent on a weekly basis to 5,689.83. Investors also shifted their focus away from Bank Nizwa and were selective in their trading on blue-chip stocks.The Al Arabi Oman 20 index rose 0.86 per cent to 1,028.66 as turnover touched RO7.1mn. The Al Arabi GCC 50 index retreated 2.37 per cent to close at 930.66, and the Al Arabi MENA200 index dropped 1.3 per cent to close at 889.64.
The Services sector was the best performer - rising 0.52 per cent to close at 2,642.16 - supported by Port Services Corporation and Muscat Gases Company . Muscat Gases was traded very actively and recorded its highest share volume since listing.
The Financial index fell 0.29 per cent to close at 6,384.43, followed by the Industrial index, which declined 0.07 per cent on a weekly basis to 6,743.60, affected by selling pressure on National Aluminium Products.
At the same time, the company aims to launch a fourth generation (4G) broadband network. Further, Omantel announced the launch of the first 4G network in the sultanate. In our view, these services will be reflected in their financial performances in Q4, besides benefitting clients with high-speed broadband services.
In June, the MSM was down 0.19 per cent, which was accompanied by a decrease in the number of securities traded and value of trades (except Bank Nizwa transactions) on the back of the holy month of Ramadan, annual holidays and investors awaiting Q2 corporate results.
In line with our view, the Services sector was the only gainer among the sub-indices, adding 0.86 per cent month-on-month (m-o-m).
The MSM30 index was the sole weekly gainer among its GCC peers for the second consecutive week.
Despite fluctuations in the stock, Bank Nizwa dropped below its IPO prices last week, but quickly recovered, supported by good volumes of bid applications, to end the week at 103bz.
This decline followed the deferment of the company's general assembly meeting due to lack of quorum, as most investors are on holidays.
Trading volumes improved 41.96 per cent last week. The recorded values of trades, excluding deals on Bank Nizwa, increased 59.2 per cent on a weekly basis.
Last week, GCC institutional investors registered net buying of RO4.28mn, followed by foreign institutional investors, who net bought RO81,000 of shares. This offset pressure from local investors - both institutions and individuals - who pulled out a net of RO4.78mn.
In positive corporate news, Oman Gas Company announced the implementation of the largest project to pump gas to Duqm Economic Area. Topaz, a subsidiary of Renaissance Services, signed a contract with the Sharjah Amiri Diwan for the production and delivery of a catamaran ferry.
Topaz also signed a loan agreement worth US$330mn with a union of banks in order to refinance some loans. It will pave the way for additional cash and investments in Topaz.
International Petroleum Investment Company (IPIC) of Abu Dhabi and Oman Oil Company formed a joint venture for the planned Duqm refinery, which will capacity of up to 230,000 barrels per day and is expected to start operations in 2017.
On the economic front, the Central Bank of Oman (CBO) issued its annual report for 201, which said that although the European debt crisis may have affected economic activity in the sultanate, it will shadow the global economic recovery in the coming period.
Expecting slowing trade in 2012, CBO said that oil prices could fall as a result of deteriorating global macroeconomic condition. Oil producing nations 'including Oman' will be affected negatively.
During the coming period, the local market will be bombarded with IPO news, especially in the banking sector. Ahlibank announced that it received regulatory approval for a 250mn share rights issue at 101bz per share (including a fee of 1bz).
Bank Sohar announced a 100mn share rights offering to shareholders. Finally, BankMuscat announced its intention to issue a rights offering at 425bz per share (including fees of 2bz). This represents a discount of 25 per cent on the current market price.
Renaissance Services is to issue 1bn bonds at 100bz each. The bond issue was rated BBB- by Capital Intelligence last week. The bonds will be issued through a rights offering or an IPO.
At the global level, news was centered around ratings of various international and Gulf companies by global agencies.
Recommendation
Considering the size of the upcoming rights and bond issues, we expect investors and portfolio/fund managers to reallocate investments towards the financial sector through tactical adjustments.
Investors will compare the coming equity and bond issues, which provide opportunities to purchase securities at an attractive discount to current market prices, and will make investment decisions on a trade‐off basis.
We, therefore, expect an increase in trading volumes during the coming week, which in turn will help investors take advantage of attractive entry/exit points. This follows our previous recommendation to investors to increase their cash positions in order to take advantage of the expected rise in trading volumes.
© Muscat Daily 2012
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