Improving oil prices to support Omani stock market

Muscat: The Omani stock market recorded volatile trading this week and remained, in terms of prices, in a range that stretched from the beginning of the month, according to an industry expert.

“In this regard, the evolution of the market contrasted with the rebound it recorded last month and could expose the main index to some risks while it was unable to return to its previous peak,” Denys Peleshok Head of Asia at CPT Markets said.

The market reacted this week to many global factors, among them the interest rate decisions of major central banks which affected traders’ expectations. The Federal Reserve, in particular, raised its interest rates and signalled that it could potentially keep its monetary policy tight for some time. This stance was supported by the strong US economic data.

The Omani central bank followed suit raising interest rates by 25 basis points, mirroring the decision of its American counterpart. The move could raise financing costs for the economy, creating more pressure on economic activity. “At the same time, higher interest rates could limit Omani investors’ appetite for risk which could weigh on the potential of the stock market as a whole,” Denys Peleshok said.

While most sectors in the stock market were down, higher interest rates could help improve banks' revenues in particular if loan growth remains strong. Other sectors could come under additional pressure. Mixed company earnings have also added to the volatility and could affect investors’ sentiment and the market’s ability to recover.

“The Omani stock market could find support in improving oil prices. Crude markets have been able to maintain a strong uptrend despite some volatility. The reductions in oil production levels previously announced by Saudi could remain a strong catalyst while a resilient US economy could boost demand expectations. At the same time, Chinese demand could remain under scrutiny,” Denys Peleshok said.

In the region, other stock markets in the Gulf Cooperation Council (GCC) recorded relatively positive performances supported by strong oil prices as well as company earnings in some cases. However, markets in the region could be exposed to the downside with traders considering changes in monetary policy as traders could move to secure their gains.

On a global scale, the European Central Bank also raised interest rates further squeezing the European economy and investors’ sentiment. The German economy recorded a negative performance while inflation remains elevated, contrasting with strong growth elsewhere. The developments could impact global investors’ appetite for risk, he further added.