Muscat Stock Exchange likely to witness strong volatility ahead

Business Saturday 27/May/2023 16:04 PM
By: Times News Service
Muscat Stock Exchange likely to witness strong volatility ahead

Muscat: Oman’s benchmark MSX index declined this week and delved below this month’s low and could eventually be heading toward this year’s low if traders continue to sell, according to an analyst.

“The market could thus extend the downtrend that started in mid-March after it reached a new high and the main index could continue to see strong volatility as traders consider the developments on the global and local stages,” said Daniel Takieddine, BDSwiss CEO MENA.

“Recent developments have effectively affected investors’ appetite for risk and could affect prices in the coming days,” he added further.

On a global stage, the US debt ceiling negotiations have affected financial markets to a certain extent and have fuelled risk aversion all around the globe. While investors considered the effects of a potential US default, many opted to take a more cautious approach and started looking to move toward safer assets, Daniel said. “This has in turn affected international traders’ involvement in markets such as the Omani stock market. In this regard, they could continue to put downward pressure during the next week as the US administration continues to discuss a deal.”

The local financial sector could continue to be driven by the consolidation moves around Ahli Bank which has received revised offers from BankDhofar and Ominvest this week. These offers ramp up the race between the two entities to grab a larger share of the local banking sector. “A successful takeover could also increase pressure on other local banks as the synergies could improve the competitive edge of the final entity. As a result, the shares of Ahli Bank appreciated and could continue to do so as the race continues,” Daniel  said.

At the same time, the banking sector’s economic performance could help stock prices limit losses and eventually return to the upside over the medium term. The local economy is expected to continue to grow this year, fuelling demand for loans. “Other sectors could also see strong economic activity. Non-oil sectors could remain the main driving factors while the energy sector could be affected by the slowing global economy and weaker-than-expected demand from China,” Daniel  said.

In this regard, while lower oil prices compared to last year could continue to pressure the Omani stock market, the slight rebound in crude prices during the last few weeks could provide some relief if the uptrend is maintained. “Opec’s meeting next week could be a focus point for traders while volatility could remain elevated to a certain extent after the Saudi energy minister’s comments on the market, warning oil short sellers in the process,” Daniel said.

Natural gas prices have also recovered slightly from this year’s low although not significantly. Both oil and natural gas prices could see some positive developments as the summer months bring a higher demand for energy as the travel season starts in the US and Europe and higher temperatures raise air conditioning needs and energy consumption in general. Such a trend could be beneficial to the Omani stock market and could help stabilise stock prices.