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MUSCAT: The regulatory authorities should reintroduce incentives for persuading more companies to go public, said a top-level official of the Muscat Securities Market.
Ahmed Saleh Al Marhoon, director-general of MSM, told the Oxford Business Group (OBG) — a global publishing, research and consultancy — that the relevant authorities, including the Capital Market Authority (CMA), should make genuine efforts to study the initial public offerings (IPOs) case in the Sultanate. There should be some incentives offered to encourage companies to go public.
Al Marhoon emphasised that family holding companies and other companies will be go public, if proper incentives are given. Such process will not only enrich and create depth for MSM but will boost faster growth to the Omani economy. Al Marhoon cited the case it was prevailing in the past when the Government used to provide some soft loans, which resulted in the formation of several new public companies.
Corporate governance
“During the 1990s, the government introduced incentives for new public companies to list at least 40 per cent of the share Capital to on the market. However, these incentives no longer exist,” Al Marhoon told the OBG. “Our market can absorb more than 10 companies on an annual basis, but without incentives it is difficult to induce companies to go public. The thinking process of most private sector companies is that they are doing well on their own and do not see many benefits in going public.”
Al Marhoon acknowledged that some family businesses in particular seemed to believe the red tape involved in listing their company outweighed the benefits that going public offered. “Family-owned companies shy away from corporate governance and additional regulation-schemes but this is a short-sighted view,” he said.
“Going public and listed on MSM brings faster growth, while allowing companies to make the most of their true market value and also ensures continuity of the business for future generations.”
The interview with Al Marhoon will feature in The Report: Oman 2011, the group’s forthcoming guide on the Sultanate’s economic activity and investment opportunities.
The report will include a detailed, sector-by-sector guide for foreign investors, together with a wide Range of interviews with the most prominent political, economic and business leaders, including His Majesty Sultan Qaboos bin Said; Ahmed bin Abdulnabi Macki, minister of national economy; and Hamood bin Sangour bin Hashim Al Zadjali, executive president of Central Bank of Oman.
Al Marhoon is confident that as the number of listed companies begins to rise the markets will gradually Gain the depth they need to develop and catch the attention of the international business community.
Foreign investors
“Foreign investors like to see markets with high market capitalisation and liquidities. However, the lack of IPOs hinders MSM from capitalising on its strength being from the best regulated and transparent market,” he said.
“If the Primary Market is weak, then the Secondary Market will not have enough companies to create depth. Our first step needs to be generating a market with sufficient depth.”
He believes that reasonably active Primary Market will provide the foundations for the MSM to build on its strength, allowing it to explore some of the more sophisticated financial tools that are generating Interest among investors, such as stock options, ETFs and mutual funds.
Al Marhoon also voiced his hope that Oman would follow other bourses in the Gulf, which have been pushing exchange-traded funds (ETF). “We hope the concept of ETF will take off in Oman and that we manage to launch our own this year,” he said.
