Muscat: Oman's benchmark Muscat Securities Exchange (MSX) witnessed some volatility this week but was able to see a positive performance, according to an industry expert.
“The main index extended, to a certain extent, the rebound that started during the previous week which could potentially help propel the market away from this year’s low if conditions improve further,” said Ahmed Negm Head of Market Research MENA at XS.com.
“However, it could remain exposed to a return to the downside considering the significant decline it recorded since its peak in March if traders return to selling. Traders’ approach to the market during the coming days could remain tied to various local and global factors,” he further added.
The financial and industrial sectors were among the best performers during this week. The financial sector was able to close the week with a slightly positive performance despite the mixed performances of bank stocks. The sector could continue to be under scrutiny as the potential for further consolidation remains and could see the sector record more price volatility in the future as a result. “The stock market could also benefit from good local fundamentals as the country is still expected to record strong growth this year,” Ahmed Negm said.
Traders' sentiments could be exposed to the global uncertainties around the economic growth in major economies. While Japan recorded stronger-than-expected growth for the first quarter of this year, it contrasted with weaker-than-expected growth in Europe which saw Germany enter negative growth. China continued to see weaker-than-expected economic data. The country has recorded declining imports and exports which could eventually affect its oil import volumes if economic activity subdues.
“Global economic uncertainties could continue to impact energy markets, fuelling volatility over the short to medium term. Oil prices have been swinging this week with no clear direction despite Saudi Arabia's announcement of a reduction in production levels,” Ahmed Negm said. “The uncertainty could affect traders' expectations regarding price levels and their impact on the economy in Oman and the local stock market. Natural gas prices have also been unable to recover and remain near this year’s lows,” he added.
Traders could monitor the publication of significant economic data in the coming days which could affect sentiment and expectations such as Chinese bank loans and industrial data as well as inflation data in Germany and the US, Ahmed Negm said. In particular, the Federal Reserve is expected to hold its next monetary policy and reveal its decision regarding interest rate levels. The central bank is expected to hold its interest rates on hold for this time which could leave room for global and local stocks to recover. “While higher interest rates have impacted the economy, a pause could provide some support. The European Central Bank (ECB) is expected to raise its interest rates, however,” Ahmed Negm added.