Saturday, October 11, 2008

Is tomorrow the time to buy Bank Muscat????

As you may know, on Friday the floor fell out from beneath pretty much every stock market in the world, and as the Muscat Market is closed on Friday, when it re-opens tomorrow its pretty clear where it will be going. Down. Down. Down.

The last few days the Muscat market has been as volatile as its allowed to be: down 10%, then up 10% (the price movement is capped at +/- 10% per day). (aside: The Government also seem to have set a floor on Omantel shares.)

So, if you've some spare cash, and want to gamble on getting a good deal and on there being no melt-down of the international financial system, talk to your broker about buying some shares at some time around 11:30am tomorrow. There's a good chance Bank Muscat will be available at bargain prices, although it can't drop below around 0.94 rials due to the cap. Its possible that it'll be even cheaper on Monday, especially if the international markets stay locked in lemming-mode, but I still think its a good long-term buy at anything around 900 biasa, if the numbers as reported are true. Same goes for Galfar around 1.1 rials, a company whose order books are full to bursting with well funded engineering projects.

As long as the oil price stays above ~$60 and people are actually able to buy the crude, the Omani economy will keep trucking just fine, thanks to major Government funded domestic infrastructure and Oil & Gas spending projects.

A huge problem is there have been no real official statements to the market on the status of Oman's banking system. What is needed now is not more adhoc waffle from the Government or the Chamber of Commerce on how cheap shares are and how solid the economy is, but some detailed audited announcements by the Finance Professionals in charge of the banks on what the actual exposure the Omani banks and banking system have to several important areas:
- The Oman housing and land market (which is also dropping like a rock)
- The Oman stock market
- Overseas investments in other stock markets
- American and European CDOs [Collateralised Debt Obligations]
- Unsecured personal loans
- Current provisions for non-performing loans vs latest non-performing rates and expected future rates of non-performance

While the banks seem to be well capitalised, and so shouldn't be going broke in normal circumstances (and are therefore reasonably safe as far as being a depositor goes), the above could have a huge impact on what they are actually worth as a shareholder.

The silence from the CEOs of the big banks is right now being taken as a sign that they are concealing bad news. The market will not recover until the air is cleared on these issues.

And if nothing is done, and the meltdown continues, there will be a big danger of a run. And if that happens, its a potential disaster scenario. No matter how big a punt you're willing and able to take on the markets (and right now a gamble is what it would be), take my advice and make sure you have a reasonable stash of cash, rice and perhaps a bit of gold folks...

The next few days may be crucial, for all of us...

4 comments:

  1. Hello, I like this blog.
    Sorry not write more, but my English is not good.
    A hug from Portugal

    ReplyDelete
  2. The silence from the CEOs of the big banks is right now being taken as a sign that they are concealing bad news. The market will not recover until the air is cleared on these issues.

    BankMuscat held an investors' meet in the MSM last month to assure them that it didn't have hidden exposures and it is not concealing any bad news. The stock market still tanked. Now they came out with their results early, even though they usually never announce early results. And the stock still fell on the day of the announcement.

    The bank's Q3 profit was it's biggest single quarter profit ever. The 9 month results are higher than the entire 2008 12 month profit. The book value of the bank's shares is somewhere around 700 baisas. This a real opportunity to buy a bank share at so close to its book value. Even if the liquidity crunch starts to bite Omani banks and there is no profit growth next year (unlikely, but possible) if you are a long term investor the share is a good buy. Even if the share doesn't go back to 2.3 rials over the next year, you are still buying at around 900 baisas. The bank has never not paid a big dividend. And don't forget that the bank is sitting on a mountain of undeclared profit in the form of their shares in India's HDFC Bank. Those shares are worth more than 100 million rials and the bank has stated that it hasn't decided yet whether to keep them or sell them.

    As an investor, if I had cash now I'd buy BankMuscat, Omantel and NBO. I would not buy Oman Cement, even though the company has good growth potential towards the end of 2009 because I am not comfortable with that company's management as compared to their main competitor, Raysut Cement. Otherwise, it might be a good time to buy into an MSM mutual fund such as Muscat Fund or Fincorp's fund (can't remember its name right now).

    ReplyDelete
  3. Anyone taking this as an investment advice, your focus should be on the following parts of the post: "So, if you've some spare cash, and want to gamble on getting a good deal and on there being no melt-down of the international financial system...

    My personal opinion, based on my over-education, experience and a trustworthy gut, is that one should not be involved in investments in the stock market now, or anytime in the near-to-medium future. It's all about the gold, the silver, and the copper-jacketed lead ;-D

    ReplyDelete
  4. We are not able to access the links to comments. I now accessed through privoxy. It seems somebody in Omantel is blocking access only to the comments.

    ReplyDelete

If you wish to post anonymously, please pick a nickname by selecting the Name/URL option, or at least sign off your comment with one! I will delete comments I find objectionable or needlessly inflammatory. Sorry for the word verification.... OMG the spam has gotten BAD these past 12 months... trying to avoid making one log in...