Oman 'needs IPOs to cool speculation'

Oman needs to list more state-owned firms to absorb surging liquidity, which is driving speculative buying on the stock market to alarming levels, a senior official of the Muscat bourse said on Monday.

Oman's economy like those of other Gulf countries is growing rapidly thanks to record oil revenues. But in contrast to the rest of the region, Omani companies are not rushing to cash in on the boom.

Oman's three initial public share offerings this year have raised $1.07 billion, compared to an estimated $11 billion in the UAE.

"The Muscat Securities Market's weakness is in IPO issuance," MSM Director General Ahmad Saleh Al Marhoon told Reuters in an interview on the sidelines of a financial markets conference.

"We urge the government to release part of their ownership like they did in the telecoms sector. There is a lot of liquidity but it needs to be absorbed through issues," he said.

The government divested a stake in Omantel, the market's biggest company, earlier this year. That IPO accounted for around 70 per cent of the total raised this year.

Marhoon warned the liquidity surplus created by oil revenues, government spending and a real estate boom was feeding speculation in the stock market. The index, which hit a record high in June at 5,699.4 points but has since eased to 4,932 points still up 46 per cent this year.

"Liquidity has driven markets to unprecedented highs and has created a tendency towards speculation," he said.

"My fear is the market is speculation-driven and (this) is very alarming to myself and others."

Marhoon also called for rule changes to encourage more family-owned businesses to list. At present a firm must offer at least 40 per cent of its stock to qualify for a listing.

"I believe if we reduced that to 20 per cent that will be an incentive for family businesses," Marhoon said.

"Our market needs more depth and have more options for investors."

Fewer than 30 of the 143 listed stocks and funds are actively traded.

Although it lacks depth, the Muscat bourse is one of the more open and better regulated in the Gulf.

Marhoon said foreign investment accounted for more than 20 per cent of market capitalisation and foreigners hold up to 70 per cent of some companies.