Muscat Securities Market (MSM) is likely to see increased activity as the bourse prepares to reshuffle its 30-stock benchmark index - MSM30 - soon. Analysts predict that the inclusion of Nawras, A'Saffa Foods, Port Services Corporation (PSC) and Salalah Mills in the index replacing a few underperforming financial services companies.
Changes to the MSM index are made each year by its indices division based on parameters like market capitalisation (m-cap), liquidity and earnings per share (EPS), among others.
Kanaga Sundar, senior analyst with Gulf Baader Capital Markets (GBCM) expects Nawras, A'Saffa Foods and PSC to be included in the index this year. "If there are more companies that might be dropped from the list then I believe Oman Oil Marketing, Oman Chlorine and Salalah Mills might also be included. On the other hand, due to decreased m-cap and low profitability, Financial Services, Gulf Investment Services and Al Hasan Engineering are likely to be removed from the index."
Analysts said that once the new MSM index constituents are announced, fund managers who track the index will have to reshuffle their portfolios, which would lead to fresh activity on the bourse.
The MSM is likely to publish the revised list soon. The new MSM index will come into effect from July 1. Last year, as many as five companies were taken out of the index to be replaced by new entrants.
Echoing the view, Anil Kumar, senior vice president of FinCorp, said that some investment holding companies are likely to be removed from the index due to their decreased m-cap.
"On the back of large m-cap, Nawras will definitely make its way to the 30-share index. Investment holding companies like Gulf Investment Service, Financial Services and Oman & Emirates Investment Services are likely to go out of the index on low EPS and m-cap."
Kumar added that the market may see increased activity once the reshuffle announcement is made. "Investors and fund managers tend to buy stocks that are due to be added, or sell shares of the stocks that are due to be dropped from the index.
"Nawras will surely see a lot of activity and fund managers will take positions in this stock. Fund managers who track the index will take positions in the new entrants," said another analyst.
© Muscat Daily 2011
