Five state IPOs since 2023
5% weight on frontier market index
Emerging market status takes time
Oman’s listing of several government companies on Muscat’s bourse has probably done little to boost the sultanate’s hopes of achieving emerging market status – for now at least.
Five state companies have gone public since 2023, raising almost $4 billion in total.
Their relatively poor post-listing performance, however, has soured investor sentiment and made further initial public offerings unlikely this year.
Oman had hoped that the flotations would lead equity index compilers MSCI and FTSE Russell to award the country emerging market status.
That in turn would cause passive funds tracking these benchmarks to buy Omani stocks included in such indexes, boosting market turnover and potentially company valuations.
Oman is at least half a decade away from realising its ambitions and needs to make policy changes first to get there, says Rohit Chawdhry, chief investment officer at Dubai’s Cross Alpha Investment Advisors
“Active emerging market funds are significantly underweight [even] on the UAE, Saudi Arabia and Qatar, which are much bigger and more liquid than Oman,” says Chawdhry.
“The government is more focused on paring down debt, reducing the fiscal deficit and improving the country’s credit rating. However, in the long term that may not help in growing the economy and creating employment.”
More than $1.3 trillion in assets under management are benchmarked against MSCI’s emerging market indexes.
For now, Oman is part of MSCI’s frontier market index, where it has a weight of less than 5 percent. It would be unusual for a country having such a small representation to be considered for the emerging market benchmark.
The first step would be for MSCI to include Oman on its watchlist for a potential upgrade. Typically, a country is on the watchlist for two to three years before beginning the upgrade process. The upgrade itself then takes a similar period.
Bourse trading volumes are also insufficient, despite state-backed funds and market makers trading stocks to bolster activity, according to Cross Alpha.
Buying and selling on the exchange is mostly local, with little spurts of participation from regional or foreign institutions.
Emerging market status may not anyway provide the fillip that Oman hopes it would bring.
Aside from Saudi Arabia, which had a 4.4 percent weighting on the MSCI emerging market index last year, Oman’s Gulf neighbours represent a tiny part of the benchmark. The combined weighting of the UAE, Qatar and Kuwait is 3 percent.
Oman would probably have a weight of less than 0.5 percent, according to Cross Alpha’s Chawdhry.
“It is unlikely to get much interest from emerging market funds,” says Chawdhry. “Getting emerging market status would be a positive step, but it would not move the needle much in terms of developing Oman’s stock market.”
Even passive frontier market funds, which must buy Omani stocks to meet their investment mandates, invest only in the days ahead of the dividend record date or when stock rebalancing occurs on the Muscat index each quarter.
The dividend record date is the cutoff date set by a company to determine which shareholders are eligible to receive a declared dividend.
Stock rebalancing is the process of relaligning the weightings of assets in an investment portfolio to maintain a desired risk level or investment strategy.
Oman’s stock index challenges are due, in part at least, to its lacklustre economic outlook. Last month the International Monetary Fund cut its 2025 GDP growth forecast for Oman by almost 1 percentage point to 2.3 percent and similarly for its 2026 forecast.
To be fair though the IMF cut its forecasts for most countries around the world following President Donald Trump’s April 2 tariff announcement and the market mayhem which followed.
“When economic growth remains muted, the earnings growth of companies will be a reflection of that,” says Chawdhry.
