The Muscat Securities Market (MSM) is trying to encourage more family-owned businesses to go public in a bid to boost the performance of the bourse, which has dropped by 17 per cent since the start of the year.
The MSM is partnering with Turkey’s Istanbul Stock Exchange (ISE) to formulate a strategy to convince family businesses of the merits of a stock market flotation.
According to Ahmed bin Saleh al-Marhoon, director general of MSM, a number of family-owned enterprises have already approached the Capital Markets Authority (CMA) interested in launching initial public offerings (IPO) on the exchange.
“MSM hopes for more IPOs, which is the only thing that will enrich the market, to create liquidity and attract more investors,” says Al-Marhoon.
The MSM’s expectation of daily turnover for this year was OR5m ($29m), but it is currently only reaching OR2-3m.
“It is unfortunate that the MSM is following the markets, which really have the problems. In Oman, our economy is doing well, the companies listed are performing well and their results are successful. So the market conditions are not reflecting the real economy or the performance of the listed companies. This is because of the sentiments of the prevailing world economic problems that have affected sentiment in Oman,” says Al-Marhoon.
The bourse grew by about 6 per cent in 2009 and sustained its position in 2010. In the beginning of 2011, it was on a steady incline reaching highs of 7,000 index points, before crashing almost a 1,000 points in late February and March. Since then it has failed to pick up and continues to decline.
The bourse’s main benchmark the MSM 30 Index has lost more than 17 per cent since the start of the year, making it the second worst performing exchange in the region, behind Bahrain.
“The secondary market also needs more; it is very slow because of no confidence in the entire region. Prices change daily, the stocks are falling and people do not want to take risks,” says Ahmed al-Hooti, senior director of information at the MSM.
Oman saw its share of protests earlier this year in March. They ended in June after Sultan Qaboos promised a wave of reforms. These reforms are set to be executed over the next few months, including a RO1.2bn increase in public spending.
“These reforms will change everything, there will be more accountability, efficiency and credibility and so more opportunities,” says Al-Hooti.
The exchange is expecting about five IPOs early next year, two of which will be recently established Islamic Banks, Al-Izz International Bank with a market capitalisation of RO150m and Bank Nizwa with a market capitalisation of RO100m. Both are floating 40 per cent.
“Our market is not deep because of the low capitalisation, which means we need more IPOs, but as far as liquidity is concerned we have a lot of liquidity, the banks have a lot of money,” says Al-Marhoon.