Shares in Omantel were opened up to foreigners on 27 October, three months after shares were first listed: the RO 288 million ($738 million) public share sale - the largest ever in the sultanate - was initially restricted to individual nationals. 'The rationale was the redistribution of wealth by the government but the offering killed the market, sucking out liquidity during the run-up, and then again afterwards as everyone focused on Omantel,' says Joe Kawkabani, fund manager at Dubai-based Shuaa Capital. 'Now the shares are open to foreigners but they are not particularly attractive, since they are trading at RO 2.1 [$5.45 - compared with an offering price of RO 1.28 ($3.32)], so the stock has witnessed selling pressure.' The share price has fallen by about 10 per cent since listing. News that the operator lost out in the bidding for a potentially lucrative mobile licence in Yemen was no help.

While recent activity on the exchange has been muted - trading value fell by some 28 per cent in September, price performance remains strong. The benchmark MSM index has risen by close to 50 per cent since the start of the year. Valuations are comparatively reasonable, with an average price-earnings [P/E] ratio of less than 12. 'Oman would be one of my top three picks regionally, along with Kuwait and Egypt,' says Kawkabani.

Financial stocks, blue-chip and smaller institutions, have led the rise. 'Bank Muscat shares are doing well after the bank took a hit in July from problems with an asset at its Bahrain subsidiary,' says Kawkabani. 'Nine-month results were better than expected.' The bank posted profits of RO 34.1 million ($87.4 million) for the first three quarters of 2005, a 29 per cent year-on-year increase. The shares of National Bank of Oman have also done well on the back of positive investor sentiment created by the acquisition by Commercial Bank of Qatar of a 34.9 per cent stake and management control, in addition to the expectation of a positive full-year result.

'Some of the smaller banks, such as Alliance Housing Bank and Oman International Bank, are also looking good,' says Kawkabani. 'ONIC [Oman National Insurance Company] is doing very well - it has taken stakes in several insurance companies and from a longer-term perspective is a good turnaround story. As a sector, cement is likely to continue proving attractive as construction activity booms and local producers undertake expansion.'

With the wider economy also growing at a healthy pace and the fall-out buoying the local private sector, the MSM is set to regain its upward course.