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MSM index edges higher

THE MSM 30 index rose 1.00 per cent in the week ended July 7 to close at 5,976, with all the three sector indices ending in the green.

Market breadth was positive with 28 advancing stocks to 19 declining stocks. Market turnover was 9.2 per cent higher compared to that in the previous week.
Key factors that influenced market movement in the previous week include:

Initial second quarter results from the industry sector were above market expectations as commodity based companies such as Oman Chlorine and National Aluminium reported a robust 29 per cent and 24 per cent sequential growth in net profit respectively in second quarter of 2011 allaying concerns on reduced profit margin owing to the wage hike Oman Chlorine reported a strong 30 per cent year-on-year as well as quarter-on-quarter growth in pre-tax profit in second quarter of 2011 at RO0.82 million benefitting from higher demand for hydrochloric acid and a better average price realisation. Net profit rose 12 per cent year-on-year in second quarter of 2011 to RO 0.71 million despite losing its tax free status from September 2010.

Al Anwar Ceramic Tiles delivered a 7.9 per cent year-on-year growth in total income and a 5.7 per cent year-on-year growth in earnings in second quarter of 2011. Net profit rose 5.6 per cent year-on-year at RO2.98 million while total income rose 8.2 per cent year-on-year to RO 9.94 million in first half of 2011
Oil prices and global markets rebounded strongly as Greece managed to receive additional funds from the EU and IMF and US jobs data in June was encouraging Amongst the top gainers, Dhofar Cattle Feed (DCFI) gained 9.3 per cent in the previous week, closing above a major resistance at RO0.140 on relatively high volume. The near term outlook for this stock is bullish and it may move higher to RO0.180, which is its next major resistance.

As this stock has been included in the MSM 30 index from July 1st onwards, it is seeing a sudden spurt in demand from portfolios that benchmark themselves to the MSM 30 index. The medium term outlook for the stock however remains bearish, owing to high input commodity costs and intense competition in its core dairy business and a weak performance of the local equity market.

National Aluminium Products (NAPI) reported a 16 per cent quarter-on-quarter growth in sales at RO6.02 million and a 24 per cent quarter-on-quarter growth in net profit at RO0.41 million in second quarter of 2011. Net profit margin expanded 50bps sequentially to 6.9 per cent, contrary to expectations that it may get squeezed further due to recent wage hikes.

However, its profitability continues to be significantly lower than in the corresponding period of the previous year, owing to lower volumes sold and stiff competition in the region. Net profit declined 34 per cent year-on-year at RO0.75 million, while sales were marginally higher by 4.6 per cent year-on-year in first half of 2011.

GCC market outlook

The DFM general index was the best performer in the previous week, amongst the regional GCC markets, gaining 2.7 per cent, followed by the Qatar Exchange index, which gained 1.7 per cent. The extension of property visas for foreigners from six months to three years in the UAE lifted expectations that demand and prices of real estate will soon improve.

The Qatar market remains firm, helped by gains in the banking and industry sectors. Heavy weight Qatar National Bank (QNB) reported a 43 per cent year-on-year growth in net profit in second quarter of 2011, driven by loan growth. The bank reported a 30 per cent year-on-year growth in net profit in first half of 2011 and continues to be a major beneficiary of Qatar's strong economic expansion. The Saudi market closed 0.55 per cent higher ahead of second quarter earnings reports from major companies.

The petrochemical sector is expected to maintain its strong net profit growth similar to its performance in first quarter of 2011.

Disclaimer: This column expresses only the views of the Fincorp and investing in stocks carries risk of financial loss for which the contributor is in no way liable.

© Times of Oman 2011