Is the MSM at last on the mend?

The Muscat Securities Market began 2002 with a 1.5 per cent rise as the central bank's reduction in interest rates and easing of restrictions on personal loans warmed investor confidence.

Perhaps the 2002 state budget will help further boost confidence, with its commitment to increase state expenditure by two per cent despite the anticipated fall in oil revenues. So may be the MSM is now at the crossroads.

It has certainly been a bumpy path. The MSM ended 2001 with a fall for the year of 24.4 per cent, with its main index at just 150 points. This contrasted with gains of similar percentages in the UAE and Kuwait.

Yet it is still hard to see where the bullish momentum will come from to help the MSM forward. The UAE saw big investments in building and infrastructure projects during 2001, while the Kuwait Stock Exchange benefited from the investment of Iraqi compensation payments into the stock market. Where will the MSM get its stimulus?

The Omani government tried to get things moving over a year ago, and largely failed. However, there is no doubt that the MSM is now better organised and more transparent than ever.

Yet worries remain about the financial strength of the companies listed on the MSM, and doubts about their management's ability to deliver higher profits in the future. It is always hard for a market that has boomed - and Oman was the best performing emerging market in 1997 - and then crashed, to pick up momentum again.

In 1997 a lot of the excess money that fuelled the market to unsustainable heights came from the UAE. And that money is likely to stay in the UAE market for the moment where prospects look much brighter. So it may well be that Oman can breathe again, and be thankful that its market has now bottomed out, but it could be some time before the buyers return.