Wednesday, September 10, 2008

MSM hits lowest point this year despite Government intervention

As predicted, despite the exhortations from the Government and the spending of Pension Funds, today the MSM hit a new record low for the year, closing at 8638.98 after falling all day. In just the past 3 months the market has fallen 28% from its record high of 12,164.54.

Will we now see the start of Phase 3 of the campaign to save face and calm the small investors?

Phase 1 was The Chairman of the Omani Chamber of Commerce Al Khonji in the press on August 17th saying all was OK, that the market was undervalued [index at ~10400], and people should take advice from their brokers (and buy).

Phase 2 was getting the Minister of Commerce HE Maqbool Bin Ali Bin Sultan to tell the Pension Fund managers to buy shares as the market plunge was not justified [index now at 8740], and (more tellingly), getting the press to inform the public that that’s what he had done before the market re-opened this week. And have the papers report the resulting ‘surge’ in the market (Good old times of Oman).

Phase 3 is now to make sure everyone knows its also happening elsewhere (but worse), and that its not the Government’s fault [index now at 8640]. Is this why we saw articles today about how the whole GCC is in the hole, that it’s the fault of the Global economy and foreigners? And this classic from the razor sharp Times of Oman News Desk, about how the Oman economy is not just booming, but (and I quote) "the reality is even bigger, better and sweeter"? (see below). Oh oh. If the Times is telling me how totally and utterly fantastic everything is for Omani Real Estate, things must be really bad.

[Readers please note, there is absolutely no connection what-so-ever between the observation that this article pumping investment in Oman real estate only happened to appear in the Times, and to the fact that the son of the paper's editor is Chairman of Blue City, a massive and hugely adventurous Real Estate speculation project thats reportedly in trouble meeting sales targets before even building phase 1. Editorial independence and hard hitting opinions are a cornerstone of The Times unquestioned editorial integrity.]

Actually, for some key stocks the market is now looking to be at a reasonable level. The last 3 months have seen some so-called Omani Bluechips dropping a long way:
Bank Muscat down 32%
National Bank of Oman down 41%
Galfar down 35%
Rennaisance down 19%

Of course they may get even cheaper over the next few weeks… But if there’s another 10% drop the market must be getting close to bottom. My pick would be Bank Muscat, if you’re willing to believe the oil price will stay high and there won’t be a credit crunch in Oman given the very high level of personal indebtedness… Hmmm.

Times of Oman (Editors Choice!): Hot property!
Times News Service
Tuesday, September 09, 2008 11:46:50 PM Oman Time
MUSCAT — While there is general talk of economic boom in Oman, the reality is even bigger, better and sweeter. Take the real estate sector for instance. With residential properties emerging as the highest income-yielding investment in the Sultanate, there are bound to be massive investments in real estate by both domestic as well as international investors.

According to a leading solution provider to real estate sector, the Omani real estate market is expected to continue its rapid growth well into the future, with analysts predicting that the value of demand will top RO8 billion by 2010.

Oman Tribune 1
Gulf stocks face more turbulence
KUWAIT CITY Stock markets in Gulf states are increasingly jittery because of global economic uncertainty and shaky investor confidence and could face a roller-coaster ride ahead, economists said on Tuesday.

Five of the region’s seven stock markets are in the red, shedding more than $120 billion since the start of 2008 despite the listing of a large number of new companies. The seven – including two in the UAE – now have a combined capitalisation of $995 billion.

“Global and domestic factors are impacting the markets, making them fluctuate sharply and become unpredictable... A slide in oil prices in recent months has compounded the impact,” Saudi economist Abdulwahab Abu Dahesh said.

“Gulf investors are less optimistic about the future despite a huge oil windfall. They are uncertain about the extent to which the troubles of the global economy will affect domestic economies,” Abu Dahesh said.

After making a remarkable comeback in 2007 from a two-year correction, the Saudi and Dubai markets have been leading the way down this year. The two markets have so far lost 25 per cent each this year, followed by Abu Dhabi Securities Exchange which has shed 8.4 per cent while Bahrain and Oman have dropped 5.1 per cent and 2 per cent, respectively.

Oman Tribune 2
Stocks fall; Russian market plunges 7.5%
LONDON European stock markets closed lower and Russia’s benchmark RTS share index plunged 7.5 per cent on Tuesday as US economic worries joined falling commodity prices and political concerns closer to home over Georgia in hammering stocks.

The RTS fell below 1,400 points for the first time since early 2006 to close at 1,395. The MICEX index shed 9.08 per cent at 1,158 points.

London’s FTSE 100 index down 0.56 per cent at 5,415.60 points. In Paris, the CAC 40 index lost 1.08 percent to 4,293.34 points and in Frankfurt the DAX shed 0.48 percent to 6,233.41 points.


  1. Well share market movement to me is like random walk theory. No body can predict in which direction a drunkard will walk.
    similiarly no body can predict how the share market will behave.

    If you dont know how to read Fin,statements for valuing a company , it is better you stay outof the is better u invest in MFs..

    The MFs are advertising the returns of 3 yrs and 5 yrs ..when it will be in minus for last six months? dont you think there should be a disclaimer on these advts?

    now i have got a nickname...

  2. UD,
    I've done a little poking around for news on the state of the markets across the Gulf and it looks like all are tanking and real estate is leading the nosedive. The stuff I've been able to read in my time-limited peruse is mostly from Gulf News and sources like that, so not very in depth. There is a lot of reference to shaken confidence in the real estate market, the pull out of foreign investment funds (seems like the blame is being placed there), and the slight rise in the dollar which adversely affects these pegged-currency markets. Can you comment on what your sense is of the reasons (is it just the bursting of a speculatory bubble?) and if so, what you see as the trend once the correction is made? I.E., is this a correction or a sign of something more systematically wrong with Gulf markets?

  3. Unike in the rest of the gulf, the real estate is not part of the MSM. None of the big ticket projects -- The Wave, Salam Yiti, Blue City, Muscat Hills...are listed. So it can only be a cascading effect of the ripples elsewhere if at all one can place the blame on shaken investor confidence following the expose of several skeletons in the UAE real estate tycoons' cupboards.

    It is no rocket science that markets are ruled more by sentiments than rationale. As it has happened in most of the emerging markets, on MSM too the foreign institutional investors had contributed a great deal to the bullish trend. On MSM they constitute about 10 percent but it was rumoured (I don't know whether this is true) that they accounted for almost 40 percent of the selling in the recent times.

  4. As is often the case, I'd say its 'all of the above'.

    Market was overheated and overvalued following the big bull run to July. Then the tipping point came, probably triggered by the oil drop, but who knows. Once the market sentiment flipped, it was always going to be a big bear for a while, helped by dollar (and rial) up, lower liquidly in GCC, Europe and USA, real estate fraud in UAE, etc etc etc.

    When a market is thought by investors to be going down, its self fulfilling. Sell now and buy later is always the better strategy.

    Longer term outcome will be dominated by oil price. Its that river of cash with no where to go that is underpinning all the major economic drive in Oman, be it touristic real estate development, new cars, credit growth, project financing, upstream oil and gas investment, you name it.

    If oil stays firm at more than $80-$90, the fundamentals of the good companies will generate enough profits to underpin a P/E of 20. If you do the work (as a prev anon suggested) on the basics of the company accounts, strip out 1 offs and share ownership, a company with a PE below 10 should be a long term buy/hold.

    But I'd stay away from real estate. Although the biggies here are not traded, and by the time they are insiders will have creamed the profits and the remaining downside liabilities will probably end up with the banks.

  5. The fall 10:55 the index stands at 8338, a drop of 3.5 per cent since yesterday's closing. I hope the government acts in a mature fashion instead of trying to prop it up artificially. A correction is always healthy, what is unhealthy would to get the index rise with govt intervention that may get the gullible ones to enter the market at a time when they are better off away from it. Except last Sunday the regulators have more or less desisted the temptation to do so. Let's hope they continue the policy of laissez faire

  6. My dick, hummer, house, newspaper, and my new city is bigger than your new city so there... And 'cos it's the biggest it's gonna be the best. Is'int it? Is'int it?? Please help. Buy a condo. Hell, buy two! Three!! Please. I'll be your bestist friend. F-o-r-e-v-e-r. Honest. Promise! Promise, promise promise.


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