Markets

Oman plans funds to enhance stock exchange liquidity

December 13, 2024, 2:48 PM

The Muscat Stock Exchange. Oman is working to diversify its economy, which remains heavily reliant on hydrocarbons

Muscat trails other Gulf bourses
Aim to increase trading activity
Low non-resident participation

Oman plans to introduce additional liquidity funds to increase trading volumes and support activity on the Muscat Stock Exchange, the exchange’s CEO has said.

The move is part of a broader strategy to attract more investors to the Sultanate’s comparatively small and illiquid capital markets.

Oman is working to diversify its economy, which remains heavily reliant on hydrocarbons. Oil and gas account for about 35 percent of Oman’s GDP, 75 percent of total fiscal revenue, and 58 percent of goods exports.

“We have worked on enhancing liquidity through implementing market-making functions,” Haitham Salim Al Salmi, told the Middle East Investor Relations Association conference this week.

“The first stage was to push the issuers to appoint the liquidity provider. The second was to introduce a liquidity fund. That has been already [done]. There are two more funds to come.”

For more economic and demographic statistics, go to our Oman economy page

A liquid market is essential for successful initial public offerings, as it ensures that investors can easily trade the newly listed shares.

Low liquidity can deter institutional investors, who often require the ability to execute large trades without significantly affecting stock prices.

In May 2024 Oman launched the $126 million Tanmia Liquidity Fund, created by the state-owned Oman National Investment Development Company in partnership with Bahrain-based investment bank SICO.

The fund aims to expand the investor base and address liquidity challenges by facilitating more trading activity on the bourse.

Oman’s stock market trails others in the Gulf region in terms of size, activity and non-resident participation.

At the end of 2022, stock market capitalisation stood at just about 19 percent of GDP, compared with an average of 93 percent of GDP across the Gulf Cooperation Council, according to an International Monetary Fund (IMF) report.

In a June report the IMF recommended steps to deepen Oman’s capital markets, including the listing of more state-owned enterprises, encouraging non-resident participation, and satisfying criteria for inclusion in widely used emerging market indices to attract foreign inflows.

Al Salmi said plans are also in the works to introduce a market-making fund.

“It's in the pipeline,” he added.