Commercial Bank of Qatar (CBQ) and Qatar Islamic Bank (QIB) are expected to raise foreign ownership limits (FOLs) on their shares in six to nine months’ time, according to a statement by Yousef Hussain Kamal, Qatar’s economy and finance minister, and chairman of the Financial Markets Development Committee. He added that other companies are expected to follow.
Kamal said the two banks have requested Qatar Exchange to increase the number of their shares available to foreign investors to 25 per cent of their full capital.
Currently, both banks allow foreigners to own up to 25 per cent of ‘free float’ (the amount of shares trading on the market), which is the maximum set for all companies on Qatar’s stock market. A shift in FOLs to a quarter of market capitalisation could mean a tenfold increase in some cases.
Companies can only increase their FOLs by obtaining regulator approval and modifying their articles of association.
Telecoms companies Ooredoo and Vodafone Qatar both have their limits set at 100 per cent. Qatari bank Masraf al-Rayan allows 49 per cent, while Doha Bank recently raised its limit to 25 per cent of market capitalisation, similar to what CBQ and QIB are targeting.
However, most Qatari companies’ shares are currently owned by local holdings, so foreigners do not get the opportunity to buy them.
“The announcement regarding CBQ and QIB may not imply a huge shift in policy, but we don’t know that unless other companies follow suit. If that happens, it could open doors for more foreign investors to tap the stock market,” said MR Raghu, head of research at Kuwait Financial Centre (Markaz), an asset management and investment banking institution.
“This is definitely step in the right direction towards getting an upgrade to the MSCI Emerging Markets Index, though more will probably need to be done.”
US-headquartered MSCI is considering Qatar and the UAE for an upgrade from its frontier markets index to its emerging markets index. It is planning to announce the results of its half-yearly review on 11 June. The indices are global equity benchmarks and serve as the basis for more than 500 exchanged traded funds.
As Qatar Exchange struggles with limited liquidity, brokers and investors have expressed doubts over the exchange receiving an upgrade, through it is stepping up efforts to boost trading through new regulation and planned initial public offerings (IPOs).
Doha Global Investment Company, a new QR45bn ($12.4bn) investment firm, was planned to go public in May, but its launch has been postponed.
In May, Hussain al-Abdulla, executive board member of Qatar Holding, the investment arm of the country’s sovereign wealth fund and chairman of the state’s exchange, announced four of Qatar Petroleum’s units with an expected valuation of QR50bn will offer shares to the public in the “coming years”.