(MENAFN- Muscat Daily) A massive sell-off wiped out RO725mn of the Muscat Securities Market's value last week as fears over the health of the global economy and sharp fall in oil prices drove local shares down the most in over 3 1/2 years on Thursday.
The MSM30 index fell 232 points or 3.26 per cent on Thursday the biggest single-day loss since February 28 2011. The sell-off which started immediately after the Eid al Adha holidays in Oman left the index at 6872.27 on Thursday its lowest since May 29 this year.
'This is a reflection of global uncertainty market fall is not related to local economic conditions which remained unchanged. The mechanism of transmission is persisting on stock markets and when risk is heightened financial institutions tend to overreact selling in frontier markets. The reaction in frontier markets is more pronounced because they are more vulnerable to global sentiments' said Dr Fabio Scacciavillani chief economist with Oman Investment Fund.
He said that in illiquid markets such as Oman's besides selling pressure lack of buying interest plays a big role in market declines. 'The uncertain global economic conditions are likely to prevail but at some point large investors will see the prices have become very attractive and stocks will move up again accordingly.'
The MSM30 index fell 8.1 per cent last week and total market capitalisation dropped from RO15.61bn to RO14.88bn.
'At the end a company's value depends on profit outlook and most of the companies in Oman are not affected by the issues in other countries. The fundamentals of the local economy and companies' outlook do not justify the fall in the market' added Dr Scacciavillani.
The financial stocks particularly investment firms were the biggest decliners on the MSM as their incomes largely depend on market performance. The Financial Index dropped 12.4 per cent last week with many investment firms losing more than 20 per cent in share prices.
'It is a matter of lack of confidence among investors. During global uncertainty people tend to reduce risk exposure in assets which changes according to market conditions' said an expert at the Capital Market Authority.
The weak global economic outlook is unlikely to affect Oman's listed companies as their revenues and profits are mostly dependent on local factors. 'There might be a decline in government revenue due to the fall in oil prices but most of the listed companies are not in the oil sector' the expert said
'Listed companies will continue to book profits and pay dividends and there is no clear economic logic behind the sell-off in the Oman market. There is a buying opportunity in Oman for long-term investors as stocks are highly underpriced compared to other regional markets' the expert added.
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