Focus: Capital Markets

Trading Places

Apr. 19, 2016

In the World Economic Forum's 2015-2016 Global Competitiveness Report, the overall competitiveness of Qatar was ranked 14th highest in the world, which earned it the top spot among countries in the Middle East and North Africa Region. That rating is largely a reflection of the country's sound macroeconomic environment, which was ranked 2nd best in the world. After years of reliable hydrocarbon revenues proving more than sufficient to support state spending, Qatar's current national budget balance is 14.5% of annual GDP and the state balance sheet shows that government coffers hold a gross national savings of 59.4% of annual GDP, earning it a ranking from the Global Competitiveness Report of 2nd and 1st respectively. Despite the impact that the declining price of oil has had on government export revenues, Qatar still maintains a public debt of just 31.5% of its annual GDP. The 11.3% tax rate on company profits and the business impact of regulations on foreign direct investments in Qatar were ranked by the Global Competitiveness Report at 2nd and 16th respectively, and help account for the country's 4th place rating in terms of the prevalence of foreign direct investments and technology transfer.

Qatar's financial market development was ranked 13th best in the world by the Global Competitiveness Report. The Global Competitiveness Report also rated both the ease of access to loans in Qatar and the efficiency of its financial sector as the best in the world, while financing through the local equity market was ranked 4th best in the world. The Global Competitiveness Report also placed Qatar at 7th place for its regulation of securities exchanges. That regulation is carried out by the Qatar Financial Markets Authority, established in 2005 as an independent regulatory authority and is concentrated on the Qatar's primary market for the issuing and trading of securities, the Qatar Stock Exchange (QSE), formerly known as the Doha Securities Market.

Both the QE Index and the QE Total Return Index showed strong growth during 2014, rising YoY 6.67% to 11,899.63 and 11.35% to 17,748.18 respectively. This upward trend was sharply reversed during 2015, when the QE Total Return Index dropped 16.96% to 14,737.32 and the QE Index fell by a 20.32% to 9,481.3 respectively, leaving both of these key indices of the QSE below their end-2013 levels. The 2015 fiscal year ended with a leveling of the decline in key market indicators for the QSE, with the QSE General Index registering just a 15.1% YoY decline from December 2014 and an optimistic 3.3% MoM growth from November 2015 to 10,429 points.
According to the 2015 Qatari Stock Exchange Investor Guide, there were 43 companies with listed shares on the QSE with a total market capitalization of $185.87 billion. The range of listed companies on the QSE include 12 banks and financial services companies, eight companies in the consumer goods and services segment, nine companies in the industrial sector, five companies in the insurance sector, four companies in the real estate sector, two companies in the information telecommunication sector, and three companies in the transportation sector. A total of 4,439,856,747 shares was traded through 2,058,604 transactions at a value of $54.73 billion, with an average of 2,157 $12.33-share exchanges per transaction. At $66,280,342,589, five of the top 15 firms by market capitalization are in the banking and financial services sector and hold a 35.66% share of the entire QSE market cap. Doha Bank, Commercial Bank, Qatar Islamic Bank, Masraf Al Rayan, and Qatar National Bank account for 88.21% of the extremely concentrated financial services sector, with Qatar National Bank alone accounting for 54.45% of the financial services sector's market cap and 22.01% of the consolidated QSE market cap.

At $7.94 billion, the consumer goods and services sector accounts for 4.27% of the total QSE market capitalization. Qatar Fuel – Woqod is the largest listed company in the sector, with a market capitalization of $4.74 billion that represents 2.55% of the total QSE market cap and 59.68% of the consumer goods and services sector's market cap.

At $6.15 billion, the market capitalization of the industrial sector represents 30.31% of consolidated QSE market capitalization. At 26.48% of total trades executed on the QSE, the 545,194 trades made for shares of listed industrial companies are the second most of any sector, behind only the banking and financial services sector. Industrial companies listed on the QSE are lead by Industries Qatar Co., whose $27.91 billion market cap represents 49.55% of the industrial sector and 15.02% of the total QSE market cap, making it the second largest company listed on the QSE.

Insurance companies hold 3.31% of the total QSE market capitalization, at $6.15 billion. Qatar's largest insurer is by far Qatar Insurance Co., with a $3.99 billion market cap that accounts for 64.96% of the insurance sector and 2.15% of the consolidated QSE capitalization. Its nearly 1.48 billion shares traded represent 33.27% of the total shares exchanged on the QSE and make the ownership of shares in the real estate sector the most actively traded among all sectors on the QSE, even ahead of the banking and financial services sector. The real estate sector's $18.17 billion market capitalization accounts for 9.77% of total QSE market cap. At $10.87 billion, Ezdan Holding Group's market cap leads the sector and accounts for 59.83% of real estate market cap and 5.85% of the total QSE market cap.

At $14.72 billion, the market capitalization of the two telecommunication companies listed on the QSE, Vodafone Qatar and Ooredoo, account for 7.92% of the total QSE market capitalization. Ooredoo, the larger of the two publicly listed ICT firms in Qatar, has a market cap of $10.90 and accounts for 74.05% of the telecommunication sector market cap and 5.86% of the total QSE market cap. The transportation sector has a market capitalization of $7.42 billion and represents 3.99% of the consolidated QSE market capitalization. Qatar Gas Transport – Nakilat leads the transportation sector, with a market cap of $3.55 billion that accounts for 47.89% of the sector and 1.91% of the entire QSE.

As its leading source for imports and its fourth largest destination for exports, China is one of Qatar's most important trade partners, with trade between the two countries more than tripling between 2008 and 2013 to nearly $11.5 billion. One of the most significant developments in Qatar's capital markets during 2015 came with the announcement in April of the first-ever clearing center in the Middle East and North Africa region to offer clearing and settlement for the Chinese renminbi. Following the rollout of the new clearing center, banks in Qatar will now have the capacity to extend their investment portfolios through the creation and issuance of such securitizable renminbi-denominated financial instruments as tradable debt market products and derivatives, particularly commodity derivatives and interest rate swaps. The greater facilitation of direct Chinese investments into Qatar's economy not only bolsters the role of the 13 existing Chinese companies that operate in Qatar as well as the 181 Chinese-Qatari joint ventures, its serves as a new precedent on the world stage of just what long-term growth potential rests at the heart of Qatar's economy in its profitable and stable financial sector.