A Liquid Market? QE(D)

COME ONE, COME ALL

In 2005, QE decided to welcome foreign investors to its stock market as of April with a decree, issued by HH Sheikh Hamad Bin Khalifa Al Thani that amended certain provisions of Law 13 (2000) regulating foreign investment. Accordingly, foreign ownership of publicly traded Qatari-based companies was capped at 25%. The limit could yet rise, and select companies already have wider welcome mat. Telcos Ooredoo and Vodafone Qatar are nominally at 100% open to foreign trade, while maximum foreign ownership for Islamic bank Masraf Al Rayan is at 49%.

THE 2013 SCORECARD

The base value of the QE General Index is 1,000 as of December 31, 1999. And on December 31 2013, the QE all shares index closed at 2,443.72, up 25.36% for the year. Of the 42 stocks traded on the QE, 26 rose for the period, while 15 stocks fell, and one gave a flat performance. Among the seven sector indices, the All Shares Transportation Index ranked first, upping gear by 38.7%, followed by the All Shares Telecom’s index, which dialed up a 36.51% gain, and the All Shares Industrials rise of 33.2%. Meanwhile, the All Share Banks & Financial Services Index rose 25.4%, and the QE Al Rayan Islamic Index 22%. Total market capitalization for 2013 stood at a lush QAR555.6 billion ($152.6 billion). The year’s 51 Treasury Bill trades toted up to QAR3.98 billion ($1.1 billion), while bond purchases generated QAR1.51 billion ($414.8 million). The QE has started 2014 confidently, by breaking the 11,000-point level for the first time since 2008 on January 13, rising to 0.9% to 11,020. The euphoria stems from anticipated strong 4Q2013 figures from the listed companies and subsequent dividend payment expectations, with foreign institutional investors having been net buyers.

THROUGH THE SHARIA-COMPLIANT WINDOW

The QE Al Rayan Islamic Index was brought to the market in January of 2013 by Qatar Exchange and Al Rayan Investment. The Index is one of total return that reflects the price performance and dividend income of Sharia-compliant equities listed on the QE. Constituent stocks are evaluated semi-annually in April and October. The index pursues stock diversification by basing its tiered weighting structure on liquidity-adjusted, free-float market capitalization.

SHOPPING TIME

In recent years, Qatar has invested in a vast and prestigious portfolio of properties and businesses abroad in its ongoing diversification away from hydrocarbon revenue. In 2007, emboldened by sheer liquidity, the Qatar Investment Authority (QIA) submitted a $2 billion bid for the 31% Nasdaq stake in London Stock Exchange (LSE). It simultaneously purchased a 9.98% stake in the Nordic exchange OMX. The moves—particularly that regarding the LSE—marked a bold assertion of Qatar’s presence in the global financial arena.

PEAK FITNESS

Another strategic purchase followed in October of 2013, as Qatar Holding, the investment division of the national sovereign wealth fund, Qatar Investment Authority (QIA), acquired NYSE Euronext’s 12% stake in the Qatari stock exchange. The deal rendered Qatar Holding the sole shareholder. In effect, the deal was a job well done” gesture, as four years earlier, QE had entered the partnership to shore up shortfalls in operational infrastructure and services. The partnership has achieved this objective, helping Qatar to confirm its financial heavyweight status on the global stage by meriting an uptick to Emerging Market (EM) from index provider MSCI. Qatar Holding is to seek a credit rating that would in turn have the additional benefit of making the Qatari bourse more transparent, and hence more appealing still to the EM-oriented foreign investor.

IPO THE WAY TO GO

The government naturally perceives IPOs as means of developing Qatar into a regional financial hub to rival those of Abu Dhabi and Dubai. Energy and Industry Minister Mohammed Saleh al-Sada has revealed Qatar’s target for IPOs valued at QAR50 billion ($13.7 billion) over the next decade.

On Qatar’s National Day, the IPO of Mesaieed Petrochemical Holding Company (MPHC) was held—the first deal since 2010 when crisis forced a moratorium on privatization. The IPO ran from 31 December 2013 to January 21 2014, and was open exclusively to Qatari nationals, who were entitled to subscribe to 27.725% of the company’s shares. The IPO, originally estimated at $880 million entailed the sale of 323.187 million shares valued at QAR3.23 billion ($886.9 million), where the total equity of the company was at QAR12.6 billion ($3.5 billion). The stock is set to trade on the Qatar Exchange in February according to Finance Minister Ali Shareef al-Emadi. MPHC is the umbrella company of three of the most successful Qatari petrochemical companies, namely QChem 1, QChem 2, and Qatar Vinyl Company Ltd. The company had been selected according to directives of the Supreme Council for Economic Affairs and Investment, under the chairmanship of HH Sheikh Tamim Bin Hamad Al Thani. Particular attention was given to its consistent generation and distribution of profit. Meanwhile, foreign investors are able buy up to 15% of MPHC in the secondary market. As it transpired, all 323.19 million shares offered were sold amid robust demand.

In May of 2013, however, Qatar postponed its earmarked float of Doha Global Investment Co., a $12bn investment firm built on assets from the nation’s sovereign wealth fund, first announced in February of 2013. Market rumors have it that the new investment vehicle would be tasked with expanding Qatar’s sumptuous portfolio of international investments across a raft of vibrant and promising sectors. In an interview with TBY Rashid Bin Ali Al-Mansoori, CEO of QE, observed that, “The development of Qatar Exchange is clearly an essential aspect of the broader development of the capital markets in Qatar.” And ultimately, robust capital markets bolster the broader economy by spurring capital allocation to those entities generating the highest return, thereby supporting private sector growth. The latter consideration is a main pillar of the Vision 2030.