Capital Markets
From The Report: Oman 2017
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The securities exchange in Muscat is a vital component of the Omani economy. The bourse serves as a showcase for the sultanate’s large enterprises, but its primary function is to act as an arena in which pooled capital can be distributed to investment sectors. In 2015, for example, the exchange had the capacity to provide OR2.56bn ($6.6bn) in funding. Throughout 2016, however, subdued oil prices and concerns about slow growth in emerging economies have made for a challenging environment, and the task of attracting liquidity to the market has become the key concern facing the authorities and regulator. As of late 2016, procedural and regulatory adjustments were being put into place to address these issues, and were expected to be central to the capital market’s ability to maintain its role in the domestic economy. This chapter contains an interview with Abdulaziz Mohammed Al Balushi, Group CEO, Ominvest.

Articles from this Chapter

Overview

Maintaining liquidity: Despite regional and global challenges, local capital markets sustain foreign interest
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The securities exchange in Muscat is a vital component of the Omani economy. The bourse serves as a showcase for the sultanate’s large enterprises, but its primary function is to act as an arena from which pooled capital can be distributed to investment sectors. In 2015, for example, the exchange had the capacity to provide OR2.56bn ($6.6bn) in funding. However, throughout 2016, subdued oil prices and concerns about slow growth in emerging economies have made for a challenging environment, and…

Interview

Outside perspectives: Abdulaziz Mohammed Al Balushi, Group CEO, OMINVEST, on interest rates and investment
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Interview: Abdulaziz Mohammed Al Balushi What impact did the US Federal Reserve’s interest rate hike have in Oman, and how has the dollar peg played into the situation? ABDULAZIZ MOHAMMED AL BALUSHI: The US election victory of Donald Trump in November 2016 has led to a major and surprising sell-off in global bond markets and drove US interest rates to the highest levels in a year. As a result of rising US bond yields, the dollar has appreciated significantly. Since most GCC currencies are pegged…

Analysis

Adjustment period: Markets in the region are adapting to oil price volatility
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Boosting liquidity and encouraging greater trading volumes are two strategic objectives shared by exchanges in the region, and in pursuing them the GCC’s stock markets face the same central question of how to mitigate the effects of stubbornly low oil prices and the economic uncertainty that results from them. The challenge was thrown into sharp relief in 2015, when it became apparent that the oil price decline would not be reversed in the short term. According to Oman’s Capital Market Authority…

Analysis

At issue: Bonds
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In 2016 Oman joined several other governments and companies in the GCC in tapping the international bond market. The main purpose of the issue was to fund the large budget deficits created as a result of the major decline in oil prices. According to Moody’s, revenues from oil and gas in Oman contributed to around 87% of total government revenues in 2010-15. The decline in oil prices of about 60% from its peak of $114 in September 2014 to around $50 as of January 2017 has created a significant shortfall between government revenues and expenses. This has led to a budget deficit of OR3.7bn ($9.6bn) in 2015, expected to rise to OR3.8bn ($9.9bn)…

Analysis

Strong fundamentals: Banking sector
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The Omani banking sector comprises a total of 16 conventional banks, of which seven are locally incorporated and nine are foreign. Conventional banks in Oman have a network of 468 branches and 1088 ATMs. Alongside conventional lenders, there are also two fully fledged Islamic banks that together have a market share of around 10% by assets. Bank Muscat is the largest institution with a market share of around 45% by assets. It is also one of the biggest listed firms on the Muscat Securities Market. Environment The year 2016 has been a challenging one for the banking sector in Oman. The plunge in oil prices that started in June 2014 has caused…

Analysis

Generating returns: Power & utilities
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As part of the requirements put in place by the government, power and water generation companies in Oman have to make an initial public offering (IPO) after a certain amount of time post-incorporation. Over the last few years, the utility IPO market has been well received by the public and institutions alike, with IPOs generally substantially oversubscribed, reflecting wide investor interest. Investor Interest The main reason for investor interest in Oman’s power utility sector is stable long-term dividends. The attractive dividend yields are supported by long-term power purchase agreement (PPA) contracts with Oman Power and Water Procurement…

Analysis

Take cover: Insurance sector equities
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Oman’s insurance market is highly competitive and fragmented, with a total of 22 insurance companies. Of these, 11 are local with the other 11 being branches of foreign insurers. The industry expanded at a robust rate of 12% per annum between 2010 and 2014, with total gross written premiums reaching $1bn by the end of the period. The sector is well capitalised with a capital-to-asset ratio of more than 30%. Insurance penetration, defined as the ratio of insurance premiums to GDP, was around 1.3% in 2014, which was lower than the GCC average of 1.4% and significantly below the global average of 6.3%. As such, the future outlook of the sector…