'Volumes have dipped quite drastically,' says Amwal Investment senior analyst Deepak Radhakrishnan. 'The proportion of institutional investors is much higher on the MSM [than elsewhere in the GCC] and they don't buy and sell so often.' And margin trading is banned on the bourse, curbing the volatility that has plagued the UAE and Saudi Arabian markets.

An average of less than 1 million shares a day were traded on the bourse in the first week of July, a third of the usual volume. The MSM 30 Index, a measure of the most active stocks, closed at 4,842 on 4 July and the bourse experienced turnover of just RO 1.6 million ($4.4 million). The index slipped 0.1 per cent over the course of the week but is up by 1.9 per cent year to date.

So far this year, the lacklustre performance of the bourse has not reflected bullish corporate performance. The dividend season is over and investors are now eagerly awaiting second-quarter results before they come back into the market. One of the first companies to report was Taageer Finance, which announced first-half net profits of RO 467,000 ($1.2 million). The announcement stoked investor interest in the stock with 208,000 shares changing hands on 4 July. 'Results are expected to be good as the majority of companies are doing well,' says Radhakrishnan. 'Toward the end of the year, prices and volumes will pick up.'

Weak market sentiment has meant market pillars Bank Muscat and Oman Telecommunications Company (Omantel) stocks are undervalued. Bank Muscat trades on a price/earnings ratio (PE) of 13.2 and Omantel's PE is 11. Market PE stands at a low 10.5 and both stocks are considered attractive buys.

Market watchers hope the recent restructuring of the MSM 30 index will trigger buying. Ten new stocks were swapped into the index on 2 July, including Bank Dhofar, Oman Cables Industry and Oman Oil Marketing. Alliance Housing Bank, Salalah Port Services and Dhofar Insurance were removed in the reshuffle that is intended to increase the liquidity of the index.

There are few new listings expected on the bourse that might help boost liquidity. Greenfield institution Bank Sohar plans to stage an initial public offering (IPO) of shares at the end of the year and speculation persists that Galfar Engineering & Contracting will stage an offering. 'There are a lot of IPOs expected in the GCC, but not many in Muscat,' says Radhakrishnan. 'People are not yet aware of the equity potential.