Capital Markets
From The Report: Oman 2019
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Muted investor sentiment since 2016 has slowed activity on Oman’s stock market. Downgrades by all three major ratings agencies and constricted spending have taken their toll on trading volumes, nudging the index into a negative trend over 2018. However, some parts of the market are benefitting from this scenario. Bonds and sukuk (Islamic bonds) have become a more inviting prospect for investors, and the two financial instruments have seen an increase in turnover during 2018. Regulations concerning real estate could also boost the popularity of a new financial instrument. Rising oil prices may prompt a return of more traditional market drivers, possibly reinvigorating the capital market over the coming year. This chapter contains an interview with Abdulaziz Mohammed Al Balushi, Group CEO, Ominvest.

Articles from this Chapter

Overview

Rising returns: Alternative investment instruments begin to gather momentum
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Muted investor sentiment since 2016 has resulted in a slowdown of activity on Oman’s stock market. Sovereign downgrades by all three major ratings agencies and constricted government spending in the wake of a rapid oil price decline have taken their toll on trading volumes, nudging the exchange’s index into a negative trend over 2018. However, some parts of the market are benefitting from the altered economic scenario. Bonds and sukuk (Islamic bonds) have become a more inviting prospect for investors…

Interview

Trusting the market: Abdulaziz Mohammed Al Balushi, Group CEO, Ominvest, on improving the investment climate with new products and innovative technologies
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Interview :Abdulaziz Mohammed Al Balushi How will new products, such as real estate investment trust (REIT) funds, contribute to and meet the needs of the sultanate? ABDULAZIZ MOHAMMED AL BALUSHI: The regulations for REITs were issued in early 2018 by the Capital Market Authority. REIT assets are an extremely popular asset class in international markets as they offer portfolio diversification and high dividend yields. They also give small investors access to high-quality institutional real…

Analysis

Secure sales: Despite credit rating downgrades, the vibrant debt market continues to attract investment
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One of the positive outcomes of the decline in oil prices over 2015 and 2016 has been a surge in activity in the GCC’s debt market. With oil revenues shrinking, governments around the Arabian Gulf have sought alternative sources of funding for their spending programmes, and the issuance of sovereign bonds has proved a useful solution for many of them. Sovereign offerings accounted for more than half of all GCC bond sales in 2017, compared to just 12% in 2016, helping to produce a record-breaking…

Analysis

Insurance incentives: Mandatory health care and Omanisation targets to boost market
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Final yearly results for Oman’s insurance market suggest that the sector has been growing at a subdued pace. However, upcoming regulations, such as those mandating compulsory health care insurance for Omanis and expatriates alike, and the required level of national Omanis working in the insurance sector, should help boost premium uptake and tackle high unemployment among nationals, bolstering overall sector activity. In 2017 the insurance sector accounted for 1.6% of GDP, down from 1.8% in 2016. Sector…

Analysis

Steady growth: Telecoms operators profit despite challenges
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The sultanate’s economic growth remained under pressure in 2017 due to a global decline in oil prices and lower government spending. As a result, the telecoms sector faced challenges such as stiff competition, regulatory reforms and changes in consumer spending behaviour. Furthermore, an increase in government royalty charges from 7% to 12%, accompanied by a rise in income taxes, significantly impacted operators’ profitability in 2017. However, total revenue in the sector increased by 1.7% year-on-year (y-o-y) from OR430.9m ($1.12bn) in the first half of 2017 to OR438.2m ($1.14bn). In the first half of 2018, mobile services accounted for around…

Analysis

Greater flexibility: Eased requirements and mergers to encourage liquidity
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Since the start of the economic slowdown in 2015, there has been much talk about consolidation in Oman’s banking sector, and in 2018 major Omani banks announced plans for potential mergers. Oman Arab Bank, the country’s only unlisted bank, and Alizz Islamic Bank signed a memorandum of understanding in October 2018 to consolidate the two entities after receiving approval from their respective regulatory boards. Alizz will continue to operate as an independent Islamic bank post-merger to retain its Islamic-oriented customer base. The new bank will enjoy a larger combined asset base of $7.6bn and higher income-generating capacity. Another major…

Analysis

Buoyed confidence: Oversubscribed international bonds underscore healthy demand
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In January 2018 Oman issued its largest-ever bond in the international market as investor confidence increased amid rising oil prices. The $6.5bn bond attracted orders worth $15bn as the price for Brent crude oil rose from lows of $45 per barrel in June 2017 to $69 on January 31, 2018. The bond was sold in three tranches: the five-year tranche raised $1.3bn, the 10-year tranche $2.5bn and the 30-year tranche $2.8bn. The latter attracted the largest interest and offered the highest margins, indicating that international investors were seeking long-term, high-yielding assets and were continuing to chase emerging market debt, despite the rise in…