Potential uptick ahead for Omani stock market

Business Saturday 06/May/2023 16:56 PM
By: Times News Service
Potential uptick ahead for Omani stock market

Muscat: The Omani stock market recorded some volatility but remained without any clear direction this week and closed near its opening price, according to a market analyst.

“Contrary to other markets in the region which saw some positive performances overall, the benchmark Muscat Stock Exchange (MSX) remained within its larger downtrend that started when the market hit a peak in March,” Farah Mourad, Senior Market Analyst of XTB MENA, said to Times of Oman.

“However, the market could gradually return to a more positive trend thanks to the changing global conditions, in particular concerning the monetary policy led by the US central bank in addition to solid local fundamentals,” she further added.

The Federal Reserve announced a new interest rate hike last Wednesday that could constitute a turning point for the US monetary policy which could see a pause and an eventual decline in interest rates later this year, Farah Mourad said.

“Such a change could help support stock markets in the US and the Middle East as traders take on more risks. The improving sentiment could see global investors return to stock markets like that of Muscat, Dubai, and others in the region,” she further added.

At the same time, some concerns could remain as the US economy is expected to see a recession later this year which could impact the global economy and as the banking sector's woes re-emerge periodically as US regional banks continue to be under stress. “Such fears could impact the local banking sector to a certain extent as investors could remain cautious. Global investors could continue to show concerns toward banks despite the strength of Omani banks,” Farah Mourad said.

The banking sector in Oman has been recording strong results and continues to see an increase in deposits, a factor increasingly monitored by investors since the failures of a number of US banks. The sector is also seeing growing loan volumes despite higher interest rates which could help banks record more profits. A strong performance in the banking sector could create an impetus for the rest of the stock market and push the main index to the upside.

“In addition, banks could also benefit from their solid credit rating, which should help dissipate investors’ concerns. Most Omani banks have seen their ratings upgraded to a positive outlook,” she added.

However, the market could still be exposed to the volatility and uncertainty in energy markets. Oil in particular fell sharply this week before rebounding and could cause some volatility in the market. “Despite its strong rebound, it remains at relatively low levels compared to last year’s peaks. The commodity is expected to see a volatile year with Chinese economic recovery being weaker than expected and the US potentially heading toward a recession,” Farah Mourad said.