Omani bourse on path to Emerging Market status

MUSCAT, DEC 2

Oman’s efforts to modernise its capital markets have positioned the Sultanate of Oman closer to earning Emerging Market (EM) classification by global index providers such as MSCI and FTSE. A new report by Oman Investment Bank (OIB) highlights the strides made in equity and fixed income markets while outlining the challenges that remain.

ROAD TO EM INCLUSION

Recent IPOs on the Oman's bourse, Muscat Stock Exchange (MSX) — notably by entities such as OQ Exploration and Production, OQ Gas Network, and Abraj Energy—have bolstered Oman’s bid for EM status, according to the report. These listings have significantly expanded the market capitalisation of MSX, which has more than doubled since 2020 to reach $32 billion. Analysts anticipate that the total market cap could further grow to $64-66 billion by 2030, driven by robust IPO pipelines and government-backed reforms.

Despite this progress, Oman is unlikely to be reviewed for EM inclusion before 2026 due to MSCI’s stringent criteria and the need for greater market depth and liquidity. However, the report anticipates inclusion by 2027 if Oman sustains its current trajectory and implements critical reforms, OIB notes in its report.

INVESTMENT GRADE UPGRADE

Oman’s reclassification journey is underpinned by its return to Investment Grade status. In September, S&P Global upgraded Oman to BBB-, citing fiscal consolidation and economic resilience. Moody’s is expected to follow with a similar upgrade in the coming months, barring major shocks such as falling oil prices or heightened geopolitical risks.

This rating improvement not only strengthens Oman’s appeal to foreign investors but also facilitates access to global capital markets. The fixed income market, valued at $46 billion in 2024, is projected to grow to $70 billion by 2030, with non-government issuances driving this expansion.

ENHANCING MARKET EFFICIENCY

The report underscores the need for further modernisation to align with global standards. Key recommendations include enabling custodians to act as clearing members, integrating with Euroclear, promoting over-the-counter debt trading, and introducing hedging mechanisms. Enhanced investor relations and increased free float in equities are also pivotal for boosting liquidity and trading volumes, which are projected to surge from $13 million daily in 2024 to $50-60 million by 2030.

Oman’s ambitious reforms reflect its vision for a diversified economy, with capital markets playing a central role in attracting foreign investment and fostering sustainable growth. While challenges remain, the outlook suggests a promising trajectory for Oman’s financial ecosystem.