S&P cuts Oman rating; markets tumble

 Oman’s stock market sank on Sunday after Standard & Poor’s cut its outlook for the country’s sovereign rating and local cement firms said natural gas prices would double – examples of the pain which the weaker Gulf oil exporters may face because of the slide in oil prices.

Brent crude slipped 0.8 percent to $69.07 a barrel on Friday after Saudi Arabia slashed its oil prices for Asian and U.S. buyers. With Oman estimated to need an average price of over $100 to balance its state budget, the government is casting about for ways to raise revenues next year.

One method is to cut state subsidies. Shares in both Raysut Cement and Oman Cement tumbled their daily 10 percent limit on Sunday after the companies said the state-guided price they paid for gas would double next year.

“That affected the market heavily as both companies are considered dividend-yield stocks,” said Adel Nasr, brokerage manager at United Securities in Muscat.

In Raysut Cement’s case, for instance, the gas price increase will raise costs by 4.5 million rials ($11.7 million), the company said. That represents 16.3 percent of its 2013 profit.

Other Omani industrial companies including Salalah Mills Co and National Detergent Co also posted announcements on Muscat’s bourse on Sunday estimating increases to their costs due to higher gas prices next year.

Telecommunications firms Ooredoo Oman and Omantel fell 8.4 and 3.4 percent respectively. Last month, Oman’s advisory Shura Council proposed raising the royalty rate for the sector to 12 percent of revenue from 7 percent.

The main Muscat stock index tumbled 4.2 percent on Sunday to 6,304 points, its lowest level since June 2013.

Credit rating agency S&P on Friday revised its outlook for Oman’s rating to negative from stable, saying the deterioration in its fiscal or external positions could be sharper than expected because of the oil price slide.

Shares in most local banks, for whom a lower sovereign rating would mean higher borrowing costs abroad, dropped by more than 4 percent.

Elsewhere in the region, weak oil prices weighed on most markets and Saudi Arabia’s main index edged down 0.2 percent.

S&P also cut its outlook for Saudi Arabia on Friday, to stable from positive. But Saudi Arabia’s state finances are much stronger than Oman’s, and analysts believe it would be able to fund moderate budget deficits much more easily in coming years.

Shares in Saudi Basic Industries fell 1.4 percent and its subsidiary Yanbu National Petrochemical Co (Yansab) tumbled 7.6 percent.

Yansab’s board proposed a cash dividend of 1.5 riyals per share for the second half of 2014 last Thursday, down from 2.0 riyals a year earlier.

The company also said it would shut down its ethylene glycol plant in April 2015 for between 35 and 60 days of planned maintenance, which would cost it about 450 million riyals ($120 million).

Overall, however, the market was mixed and a number of stocks posted gains. Saudi Arabia’s National Industrialization Co (Tasnee) added 0.5 percent after saying it had completed a 1.8 billion riyal deal to raise its majority stake in its Cristal subsidiary by a further 13 percentage points.

Dubai’s index was nearly flat with an equal split between losers and gainers; trading volume was low. Abu Dhabi’s benchmark edged up 0.3 percent on the back of blue chips.

First Gulf Bank rose 0.8 percent, Abu Dhabi Commercial Bank gained 1.3 percent and developer Aldar Properties climbed 1.7 percent.

Egypt’s bourse edged up 0.8 percent. Investment firm Pioneers Holding was the main support, surging 8.0 percent.

The company posted a 15 percent increse in third-quarter net profit last week and Denmark’s Arla Foods Amba, one of Pioneers’ competitors in a bidding war for Arab Dairy Product Company, dropped its bid last Wednesday.

Property developer Talat Moustafa Group added 1.5 percent to 10.66 pounds and was the main support after brokerage Blominvest last Friday affirmed its “accumulate” rating for the stock with a target price of 11.29 pounds.-Reuters