MSX index consolidates its gains rising for second week in a row

Muscat: Oman's benchmark Muscat Securities Exchange (MSX) main index has been able to rebound since the beginning of June and remains above this year’s lows, it could come under some pressure if traders move to secure their gain while the market maintains a bearish trend for the last couple of months, according to an analyst.

“Traders monitored the developments in monetary policies in major economies in search of guidelines,” said Mazen Salhab - Chief Market Strategist MENA in BDSwiss.

“Three major central bank meetings were scheduled this week, which affected global markets and fuelled some volatility. The Federal Reserve was closely monitored in particular due to its importance to the Omani market. The US central bank kept interest rates unchanged as expected but raised its interest rate target for this year,” he further added.

The Omani central bank followed suit and maintained interest rates at their current level. While interest rates could rise again this year, the current pause could provide some relief to the Omani economy and the local stock market as companies see more stable financing costs and risk appetite could improve.

“The stock market was again driven this week by the banking sector which recorded a positive performance. The current direction of interest rates could help banks maintain strong profits. Meanwhile, the race toward consolidation in the sector continued with Bank Dhofar bidding for Ahli Bank,” Mazen Salhab said.

Last week, the MSX index witnessed good performance for the main index and the financial sector index. The main index consolidated its gains, rising for the second week in a row, and closed at the end of Thursday’s trading at 4,681 points, up by 22 points. The financial sector index rose by 65 points, and other sectoral indices recorded slight declines.

Other stock markets in the region recorded mixed performances with traders erring toward caution in some cases. While some were able to record more gains thanks to strong local fundamentals and improving risk appetite, others were however impacted by the volatility and uncertainty in energy markets.

Despite their high volatility and this week’s rebound, energy markets remained at relatively low levels and were unable to provide strong support to the Omani stock market, he said. “In this regard, energy markets could continue to see some volatility while traders consider the changes in the balance between supply and demand,” he added.
In this regard, hopes of improving economic conditions in China could provide some support for oil prices in particular. Weaker-than-expected recovery in China has significantly affected expectations until now. The Chinese central bank has moved to reduce some borrowing costs to help stimulate the economy and could continue to do so, potentially improving demand for energy products in the process.

“Several Federal Reserve board members are expected to speak next week. They could provide some indications regarding the next steps in monetary policy which could affect trader’s expectations locally and globally. The Swiss and British central banks are also expected to decide on their interest rate levels,” Mazen Salhab said.