Qatar Exchange rebounds

06 September 2011

Gulf state’s index showing positive signs

Qatar’s immense gas reserves has ensured the Gulf state’s strong growth and positive outlook, but it is not immune to global financial patterns and the political unrest across the region.

During the month of Ramadan (during August) the Qatar Exchange (QE) fell about 9 per cent, losing nearly $3.3bn in market capitalisation, closing at $119.7bn on 29 August, the last day of trading before the Eid al-Fitr holiday.

The bourse did edge higher this week as trading resumed, with its 20-strong QE Index closing 1.07 per cent higher at 8440.88 points on 4 September, the first day of trading after the Eid break.

The gain was shattered the following day as foreign institutions rushed to sell, bringing the index down 1.58 per cent as it plunged to 8304.48 per cent.

As the index rose 0.42 per cent to 8342.19 on 6 September, confidence among investors rose once again, but the market is still down about 4 per cent on the same date in 2010.

Yet, compared with other bourses in the region, Qatar has come away relatively unscathed.

“The QE has witnessed lower losses [on the previous year] compared with other markets. From a macroeconomic point of view, Qatar is an outperformer and is the only country in the region with double-digit growth projected this year,” says Liz Martins, senior economist at HSBC.

Gross Domestic Product (GDP) growth is expected to rise 13 per cent by the end of 2011 and is likely to continue into 2012. In fact, growth has been in double digits since 2007, even during the global financial crisis.

“With the highest GDP per capita in the region, Qatar has an extensive ability to spend and to, therefore, stimulate the economy. There is little issue of unemployment and very limited political risk. Both the UAE and Qatar have stood out as political safe havens, which has benefited them,” says Martins.

The state budget is being spent on infrastructure projects, much of it for the Fifa World Cup football competition in 2022. This has benefited the banking and financial services, as well as industrial stocks. The markets are expecting a further boost after the government’s decision to raise its employees’ salaries by 60 per cent at the beginning of this month.

Results from the first six months of the year proved promising for the bourse. Market capitalisation stood at QR445.07bn ($122.20bn) at the end of June 2011, compared with last year’s QR365.28bn. The index was over 8300 in June 2011, up from last year’s 6900 points. Trading volumes grew, along with trading value, which increased by more than QR12bn.

The QE however is not immune from global financial movements. It lost about 12 per cent in the first three months of the year as unrest swept across the Arab region and oil prices soared. It shed 3.6 per cent on 3 March alone.

It also fell slightly to 8214.35 in the wake of US analyst MSCI’s decision in June to postpone the upgrade of Qatar’s status from frontier market to emerging status until December this year.  An upgrade would boost foreign investment on the exchange but currently foreign ownership is capped at 25 per cent, which is below MSCI’s requirements.

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