25 February 2016
MUSCAT: Despite the stock markets in the region touching their bottom during the last more than a year, most large cap companies are still reporting better performance and prudent management.
On the Muscat Securities Market, many companies have been able to weather the current recession arising out of the falling oil prices.
Blue‐chip stocks, especially those in the telecom and banking sectors continue to be the major pick of investors.
Last week alone, the local bourse increased 1.2 per cent on the back of buying interest. Also most companies are maintaining their dividend at par with last year.
Oil prices have averaged around $33 a barrel this month which helped lift major Gulf bourses away from their multi-year lows hit in mid-January, and more recently a significant rise in trading volumes indicated investors have become encouraged to return to markets.
The Saudi stock index, last at 6,023 points, faces resistance at the February and January peaks of 6,056 and 6,098 points, respectively, but may fail to reach those levels as petrochemical stocks, which have recently supported the bourse, could be vulnerable to a sell-off.
Dubai's benchmark last at 3,192 points, may test resistance on its late December peak of 3,189 points.
A clean break would trigger a reverse head & shoulders pattern formed by the highs and lows since December, and pointing sharply higher.
According to a report by United Securities, a leading brokerage house in the Sultanate, a very significant positive development over the last few years is the significant improvement in the regulatory environment in the regional markets.
"Exchanges are moving towards international standards and thereby attracting foreign investments in a big way. Inclusion in the MSCI indices and opening up of Saudi markets are evidence to this improvement", the report says.
The MSCI Emerging Markets Index is an index created by Morgan Stanley Capital International (MSCI) that is designed to measure equity market performance in global emerging markets.
In the region, which have already witnessed three major recessions since the millennia, banking sector has maintained provisions of over 100 per cent and systems have been improved and are currently capable of scrutinizing any systemic fall backs.
There has been significant value erosion in the equity markets which have struggled to re-adjust to the new reality.
"We believe long before the oil markets adjust itself, the equity markets will stabilize. The regional equity market currently trades at trough valuations and it is clear that at this juncture reward clearly outweighs the risk taken", the report said.
The banks in the region are amongst the most capitalized in the world and considered the safest points out the report.
Attempts towards economic diversification have led to significant investments in several sectors such as real estate, telecom, consumer discretionary etc.
Most of these sectors are still at their nascent stages and will witness significant growth in the years to come.
The comparative advantage of the regional petrochemical sector will continue to remain and near impossible to replicate.
While one side low oil prices have started triggering price elastic demand, cancellation of over $380 billion worth of capex in the industry will stall any further increase in supply.
"We believe the re-balancing of oil supply demand will take place towards the fag end of this year and oil prices will bottom out in 2016", the report said.
MUSCAT: Despite the stock markets in the region touching their bottom during the last more than a year, most large cap companies are still reporting better performance and prudent management.
On the Muscat Securities Market, many companies have been able to weather the current recession arising out of the falling oil prices.
Blue‐chip stocks, especially those in the telecom and banking sectors continue to be the major pick of investors.
Last week alone, the local bourse increased 1.2 per cent on the back of buying interest. Also most companies are maintaining their dividend at par with last year.
Oil prices have averaged around $33 a barrel this month which helped lift major Gulf bourses away from their multi-year lows hit in mid-January, and more recently a significant rise in trading volumes indicated investors have become encouraged to return to markets.
The Saudi stock index, last at 6,023 points, faces resistance at the February and January peaks of 6,056 and 6,098 points, respectively, but may fail to reach those levels as petrochemical stocks, which have recently supported the bourse, could be vulnerable to a sell-off.
Dubai's benchmark last at 3,192 points, may test resistance on its late December peak of 3,189 points.
A clean break would trigger a reverse head & shoulders pattern formed by the highs and lows since December, and pointing sharply higher.
According to a report by United Securities, a leading brokerage house in the Sultanate, a very significant positive development over the last few years is the significant improvement in the regulatory environment in the regional markets.
"Exchanges are moving towards international standards and thereby attracting foreign investments in a big way. Inclusion in the MSCI indices and opening up of Saudi markets are evidence to this improvement", the report says.
The MSCI Emerging Markets Index is an index created by Morgan Stanley Capital International (MSCI) that is designed to measure equity market performance in global emerging markets.
In the region, which have already witnessed three major recessions since the millennia, banking sector has maintained provisions of over 100 per cent and systems have been improved and are currently capable of scrutinizing any systemic fall backs.
There has been significant value erosion in the equity markets which have struggled to re-adjust to the new reality.
"We believe long before the oil markets adjust itself, the equity markets will stabilize. The regional equity market currently trades at trough valuations and it is clear that at this juncture reward clearly outweighs the risk taken", the report said.
The banks in the region are amongst the most capitalized in the world and considered the safest points out the report.
Attempts towards economic diversification have led to significant investments in several sectors such as real estate, telecom, consumer discretionary etc.
Most of these sectors are still at their nascent stages and will witness significant growth in the years to come.
The comparative advantage of the regional petrochemical sector will continue to remain and near impossible to replicate.
While one side low oil prices have started triggering price elastic demand, cancellation of over $380 billion worth of capex in the industry will stall any further increase in supply.
"We believe the re-balancing of oil supply demand will take place towards the fag end of this year and oil prices will bottom out in 2016", the report said.
© Oman Daily Observer 2016
