In this Vantage interview, Haitham Al Salmi, CEO of Muscat Stock Exchange (MSX), speaks to Neil Shah, executive director and market strategist at Edison Group. They discuss the reforms that have improved liquidity and access for international investors in Oman and what a FTSE Russell index upgrade could unlock for Omani companies. The conversation also covers MSX’s IPO pipeline and growing market capitalisation, the exchange’s research collaboration with Edison, how Oman competes with its Gulf Cooperation Council (GCC) neighbours for emerging market allocations, and plans for ETFs, derivatives and tokenisation.
What did international institutions have to do to buy Omani stocks five years ago, and what has the Muscat Stock Exchange changed since then?
Haitham Al Salmi: Five years ago, we had always been a frontier market. Participation from foreign investors was limited. The main reason for the lack of investment in Oman was the liquidity issue. We understand that most investors look at their exit routes before they enter a market. So, our focus was mainly on creating a more accessible market, fixing the requirements to enrol investors and creating liquidity – the right liquidity that attracts investment.
We understand it’s not just about bringing in new investors. It’s also about unlocking the right value of our listed stocks. So, we kept the market upgrade to emerging status at the core of what we want to do, because we understand it’s not the ultimate goal, but it’s the way forward to ensure that our liquidity is recognised.
We worked on liquidity boosters, including having more instruments to trade, adjusting the free float, removing the ceilings on foreign investors, linking with the global custodians and having more products that fit post-trade requirements, including omnibus structures, securities lending and borrowing, and short selling. That has really helped boost the market. The final touch that really made the difference is having market makers operating in the market and providing liquidity services to issuers.
What will an FTSE Russell index upgrade to secondary emerging market status unlock for Omani companies and investors?
Haitham Al Salmi: It is a testament to what we have achieved and shows that we meet the requirements. The ultimate goal here is to enlarge the market cap and bring more products to the market. FTSE Russell putting Oman on the watchlist is a testament that we meet the requirements. Going forward, we need to achieve the full upgrade.
We understand that there are followers of FTSE Russell indices, and those followers invest in the region based on the weightings they take from those indices. So as soon as we get the upgrade, I believe there will be a good influence on Oman from the followers of FTSE Russell indices, and we will also be ready to bring more securities into FTSE Russell’s indices.
It also shows that the way the index is calculated fits what we do in terms of benchmarking ourselves to the right free float and to the right annualised traded value ratio (ATVR) – the traded volumes required by international investors.
With market capitalisation up around 25% in a year to nearly $100bn and recent listings such as the OQ companies and Asyad Shipping, what is MSX’s IPO pipeline and how will it bring private and family-run businesses to the public market?
Haitham Al Salmi: The best thing that happened is when we benchmarked ourselves to GDP, which is how we see whether we are the right size compared with the size of our economy. We started back in 2020, which is the baseline for MSX. Traded equity and bonds were 20% of total GDP. Currently, we are close to 40%, which is almost double what we used to be.
I think unlocking the value of listed companies is the best way to bring more attention to the exchange. If we want to list issuers, if we want to list family businesses, we need to unlock the value. Without liquidity, the value was at its lowest. Companies used to pay a dividend yield of approximately 9% to create value. Now the average in the market is below 5%. The difference is where the prices went up.
Our market performance last year was more than 28%, and year to date we are at 31%. That in itself has moved valuations up, and it allows companies that are really looking to list on the exchange to get the right value for their shares, so shareholders maximise their worth.
Beyond infrastructure, what is MSX doing to make its listed companies better known and more actively traded?
Haitham Al Salmi: The first thing is to allow our companies to be benchmarked against cross-border companies – our neighbouring companies. What we did here is work closely with the GCC to have unified ESG metrics and unified IR best-practice guidelines. Building on that, Omani companies can now be benchmarked because they’re following the same standards as other GCC companies.
Now we need to bring more attention, and that’s what we want to do by sponsoring research. First of all, to have more coverage, and the new research will reach different types of investors and different investor databases. That’s why we are signing a sponsored research project together that will bring visibility to our companies and unlock a wider investor base for Oman.
Why has MSX taken the lead on sponsored research and investor engagement with Edison rather than leaving it to issuers, and what does it hope the collaboration will deliver?
Haitham Al Salmi: Going back to when liquidity was a concern in Oman, the appetite from investors and analysts to cover Oman was too low. Now we do have the volume required for foreign investors to come. But the research being published is mainly local and regional. We thought that to increase visibility and bring higher standards to the way researchers and analysts structure their reports, we need to go beyond the local market and the region.
That’s where this alliance with Edison came about, because we understand that the way they will look at the companies, the coverage they will provide and the outreach to investors will be totally different from what we would get if we just considered local research.
Being on the FTSE Russell watchlist also adds an additional layer that requires us to move a little further outside the region and bring more attention. The plan here is a two-year collaboration – research, coverage, updates – and then we push it forward to the issuers, because they will feel the value. Sometimes you need to take the first hit to create the value, and that value will then circulate through the whole economy.
Is the exchange effectively acting as the spark plug to get the engine going?
Haitham Al Salmi: We are the ignition of the project. Hopefully, the issuers will take it forward from there.
What makes Oman more attractive than Saudi Arabia, the UAE and Qatar when competing for emerging market allocations, and how does MSX’s agenda fit with the country’s wider 2040 agenda?
Haitham Al Salmi: We understand that investments have no passports. They flow between borders easily. I think the attraction is the opportunities we offer to investors. What we want to do is not just compete as an exchange, but compete on the type of companies and the rewards those companies are giving. I think the GCC has already gone through the EM [emerging markets] story, and the next story is Oman – that’s what we are betting on.
We have also reached the liquidity required to build additional products on what we currently have. To have ETFs and derivatives, you need a liquid market. Now we have a liquid market, and I think the next phase will be bringing in new products that fit the requirements and appetite of investors.
What is next for MSX’s transformation, and what is the one measure it should be judged on over the next three years?
Haitham Al Salmi: We’ll continue the pipeline of IPOs to have more products and more sectors covered. That will help us reflect Oman’s real economy through the indices we have in the market. We will build products on those products, including ETFs and derivatives, which will help the ecosystem create more liquidity.
Furthermore, we are also looking into digital products, such as tokenisation. The announcement of the Oman International Financial Center will open the gates for the exchange to explore opportunities to be part of this initiative and offer more products with an international flavour under common-law requirements.
Is there more to come from Oman’s capital market transformation?
Haitham Al Salmi: I would say we are just starting. What we have achieved is just the baseline of what we can really provide and achieve later on.
This transcript has been lightly edited for clarity and readability. Verbal fillers, false starts and minor repetitions have been removed from the interviewee’s responses only. Punctuation, spelling and formatting have also been standardised in line with Edison house style. No substantive changes have been made to the meaning of the discussion
