Omani stock market maintains uptrend despite volatility

Muscat: The Muscat stock exchange’s main index recorded a relatively positive week and extended previous gains although trading was somewhat volatile during daily sessions, according to an industry expert.

“While it remains exposed to the downside to a certain extent in light of the mitigated performance of the first half of the year, the market could potentially see more gains with sentiment improving on the global and local stages,” said Ahmed Negm, Head of Market Research MENA at XS.com.

The release of slightly lower-than-expected inflation data in the US this week has fuelled uncertainty regarding the trajectory of interest rates and their impact on the Omani economy and stock market, he further said. “Expectations of a softer monetary policy stance from the Federal Reserve could also nurture traders' appetite for risk among local and international investors which could target markets like Oman. It could also affect banks and other sectors,” he added.

While the Federal Reserve could still raise interest rates at their next meeting at the end of this month, the central bank could abandon its aggressive stance that resulted in a rapid tightening in financing costs in the US and the Gulf Cooperation Council (GCC). “If inflation continues to decline, the market could see a gradual return to lower interest rates next year which could create more favourable conditions for the Omani stock market among others,” said Ahmed Negm.

Omani stocks could also respond positively to the current developments in energy markets where oil prices have been recovering this month. Traders have been taking into account a potential tightening in the market with production levels being reduced by Saudi Arabia and Russia. “At the same time, demand from China, the largest importer of Omani crude, could remain under scrutiny as the country’s economic recovery remains weaker than it previously hoped for,” he added.

This week traders will continue to closely follow companies’ earnings releases in Oman and the US where strong figures could encourage risk-taking and push stock markets to the upside. The start of earnings season has seen US banks release above-estimated results while Omani banks also recorded strong figures. “Local banks have been able to improve revenues and profits which could help strengthen traders’ sentiment and the market’s direction as a whole,” said Ahmed Negm.

With a more stable outlook on interest rates, banks in Oman and the economy as a whole could see fewer risks as financing costs stabilise and pressures on businesses abate to a certain extent. “Over the medium to long term, economic conditions could improve further as a result, helping the stock market see more strength,” he further added.