Banking stocks dominate the MSM and the biggest of them, Bank Muscat, has been setting a good example. Its shares have risen by 45 per cent since the start of the year and the bank is offering ample justification for investor confidence. It was recently part of an HSBC-led team which won the advisory mandate for the sale of a stake in state-owned Oman Telecommunications Company (Omantel), while it has obtained approval from Riyadh to begin operations in Saudi Arabia.

Oman International Bank shares have also been performing strongly, as have those of Oman International Development & Investment Company (Ominvest), whose largest single holding is in Oman Arab Bank. 'Conservative policies by the Central Bank of Oman have left the banking sector strong and well capitalised,' says Matthew Eyre of Blakeney Management. 'And banks are poised to benefit from a steady flow of provisioning write-downs over the next few years.'

Banks and other blue-chips are also set to profit as interest rates turn the corner and start heading upwards - as appears likely following the 30 June decision by the US Federal Reserve to raise rates by 0.25 per cent. 'With high capital adequacy ratios, banks have net cash positions on their balance sheets so will enjoy the effects of rising rates,' says Eyre. 'And similarly Omantel has typically just hoarded its cash in the bank.'

A 20 per cent stake in Omantel is due to come to market via an IPO by the end of the year, as are stakes in the Al-Kamil and Barka power plant holding companies. 'The power plant shares will behave like fixed-income instruments, and therefore would typically be defensive stocks, attractive in bearish times. But the appetite for the Al-Maha IPO in March demonstrated the enormous appetite of investors for new outlets for their funds, even in not particularly exciting stocks,' says Eyre.

Another sector benefiting from this appetite is real estate and consequently cement stocks look a good buy. Shares in Oman Cement Company have risen by more than 50 per cent since the start of the year and Raysut Cement Company has also done well, having recently set in train expansion plans. Partly the local success reflects tight markets elsewhere in the Gulf, staunching the export flow. However, the sultanate's cement producers are also taking advantage of export opportunities themselves in the Horn of Africa. And the local construction market is buoyant on the back of strong domestic product (GDP) growth and rising government capital expenditure, bringing long-awaited construction projects to fruition.