Health insurance, REITs, ETFs to buoy MSM in 2020

MUSCAT, JAN 14 - The planned roll-out of a number of key initiatives, notably in the form of Mandatory Health Insurance, Real Estate Investment Trusts (REITs) and Exchange-Traded Funds (ETFs), is expected to have a positive impact on the performance of the Muscat Securities Market (MSM) during 2020, according to local Omani investment services firm Ubhar Capital SAOC (U-Capital). The Muscat-based company listed a number of events and developments – international, regional and local – that, it said, would likely influence the performance – upward or downward – of Oman’s only bourse in the New Year.

The MSM Index dropped 7.9 per cent to close at 3,981 points at the end of 2019, the only stock market in the GCC to have posted a decline last year.

But boding well for a healthy uptick in the performance of the MSM are a number of factors, most notably the “expansionary budget” unveiled by the government earlier this month, which promises to “boost overall market sentiment”, said U-Capital in a report detailing its outlook for 2020. It referenced in this regard the International Monetary Fund’s (IMF) projections that Oman would outperform its GCC peers in terms of GDP growth in 2020.

The report sees credit growth being buoyed by, among other developments, Tanfeedh – also known as the National Programme for Enhancing Economic Diversification. Also expected to make a positive impact are improvements in hydrocarbon revenues linked to an expected ramp-up in volumes from the Khazzan and Ghazeer gas fields in Block 61, it said.

Initial Public Offerings (IPOs), while few and far between, are expected to nevertheless make a contribution as well, according to U-Capital.

“The IPO market will remain slightly better than in 2019. We expect one IPO in insurance, along with one in (the electricity services sector). Plans for an IPO by OQ (formerly Oman Oil and Orpic Group) are still in the early stages, which we believe will be realised a year after,” it said.

Also auguring well for an improvement in the performance of the MSM in 2020 are Real Estate Investment Trusts (REITs), the first of which made its debut in the Sultanate earlier this month, said U-Capital.

Equally promising are Exchange-Traded Funds (ETFs), which are likely to be launched soon on the MSM. An ETF is a basket of stocks that reflects the composition of a stock market index. They are typically investment funds that are listed and traded on exchanges much like stocks. An ETF’s trading value is based on the net asset value of the underlying stocks that it represents.

A significant bump in the fortunes of insurance companies is anticipated when the first stage of the keenly awaited Mandatory Health Insurance Scheme (Dhamani) is rolled out sometime during the year. Insurance density (premium underwritten/population) is expected to improve on account of mandatory health insurance and other regulatory changes, according to U-Capital.

“Regulators across Oman are increasingly collaborating with insurance companies to educate consumers on protection and risk-mitigating insurance offerings to make a positive impact on the development of the industry,” it further noted.

A degree of upheaval is anticipated in the telecom sector in 2020 when the Vodafone-led third telecom operations commences operations, spurring new competition in the local market. “However, we do not expect an immediate impact on the existing operators in 2020 but will see an erosion of market share of their over the next 2-3 years,” said U-Capital, noting that falling minutes of usage (MoU) due to increased use of OTT apps will also continue to weigh on voice telephony revenues.