Foreign investors are offloading shares on the Muscat Securities Market (MSM), which has resulted in a marginal dilution of non-Omani holdings on the local bourse, according to reports in Muscat.
With a drop in crude oil and natural gas prices (which account for as high as 70 per cent of government revenue this year), foreign fund managers have reallocated their investment funds. “The overall non-Omani ownership in the Sultanate’s listed firms has declined to 27.17 per cent, from 27.80 per cent at the end of last year,” said Joice Mathew, head of research at United Securities.
While the shift is not monumental, of greater concern is, as Mathew noted, that the outlook of foreign investors on regional bourses has altered focus after a sluggish trend in the oil market. There could be some inter-regional portfolio reallocation, in the aftermath of a drop in oil prices. Funds could be going to Kuwait and Saudi bourses from Oman and Qatar.
Within the Gulf Cooperation Council (GCC) region, Kuwait and the Saudi Arabia markets have attracted additional foreign portfolio investments in recent months. The Saudi bourse has announced several reforms to attract foreign investment.
Foreign fund managers generally acquire blue chip stocks from regional bourses. In the case of Muscat Securities Market (MSM), the preferred stocks for foreign investors include Bank Muscat, Oman Telecommunications Company, National Bank of Oman, Ooredoo Oman and Bank Dhofar.
Foreign ownership in Bank Muscat’s shares has declined to 28.5 per cent currently, from 30 per cent by the end of 2016. Likewise, the foreign stake in Oman Telecommunications Company stock declined to 4.1 per cent from 5.5 per cent by end-December, 2016.
The MSM general index—MSM 30 Index—declined by 6.19 per cent or 358 points year-to-date to close at 5,423.91 points, mainly on account of a bearish trend in the oil market.
Although, there was a recovery in oil prices, which is slightly below the $50 a barrel-mark, the market faces glut even now. The Oman bourse recovered almost 7 per cent in 2016, thanks to a positive shift towards the end of the year. The MSM has 130 companies listed.
The first quarter performance of Oman’s listed companies was affected by an increase in corporate income tax, a rise in natural gas prices and a hike in electricity charges for large consumers. The newly introduced withholding tax on dividend income paid to foreigners at 10 per cent is also adversely affecting the attractiveness of Omani market among the foreign investors.
Oman’s listed companies have already debited 10 per cent of dividend income payable to foreign investors, which includes expatriates living in the country.