The MSCI upgrade would not only ensure better visibility of QE-listed firms before foreign investors but also entice other entities, including family-owned companies, to go public.
By Santhosh V Perumal/Business Reporter
The Qatar Exchange (QE) expects as much as QR5bn foreign funds inflow after its upgrade by MSCI to emerging market, effective June this year.
The bourse, which is slated to see more listings in future, could very soon see the advent of exchange traded funds, its acting chairman Dr Hussain Ali al-Abdullah said. “May be QR3bn to QR5bn will come from foreign investors to Qatar” (after the upgrade), he said on the sidelines of the function to mark the debut of Mesaieed Petrochemical Holding Company, a Qatar Petroleum subsidiary, on the QE.
Global index compiler MSCI had last year upgraded Qatar and the UAE to ‘emerging’ market from the ‘frontier’ status, after having maintained the status-quo on previous occasions.
“The upgrade will add more liquidity to the market,” al-Abdullah said.
An upgrade would not only ensure better visibility of the existing listed firms before foreign financial powerhouses but also entice other entities, including family-owned companies, to go public. Liquid stocks ought to benefit more.
MSCI’s market classification framework consists of three criteria: economic development, size and liquidity as well as market accessibility. However, economic development is applicable only in the case of classification of developed markets.
Qatar’s economy is strong and companies listed are “performing very well” and attracting local and foreign investors alike. The QE was among the best performing market in the region last year and second best dividend paying market globally, a bourse spokesman had said.
“The increase in the number of shares available to foreign investors significantly opens up the market in Qatar. This affirms the commitment of the government to transform Qatar into a regional investment hub,” former finance minister Yousef Hussein Kamal had said.
Many financial experts viewed both higher foreign ownership limits and an upgrade to ‘emerging’ market status as “inevitable” because of the growing and solid investment opportunities in Qatar and the shrinking prospects in other investment destinations.
Standard Chartered recently held Qatar’s upgrade to ‘emerging’ market is important for the country but there was a need for more investment instruments, particularly local currency debts; where Doha can take the lead in the Gulf region in creating the market.
“The upgrade is important because global investors will be looking at Qatar, whose economy will grow fast and boom. It is a stable economy as well,” StanChart’s global head for macro research Marios Maratheftis said.
The parties, which are responsible for the financial markets in Qatar, are making “extensive efforts” to provide an investment environment that is more attractive for foreign investors to direct their investments towards the Qatari market by encouraging several listed companies to increase the maximum ownership percentage allocated for non-Qataris, according to the Financial Markets Development Committee of Qatar.
Qatar, which was relatively “immune” to the global and regional shocks, has been growing steadfast and is expected to tick double-digit growth. The country’s its huge capital expenditure, along with diversification into non-oil economy, offers huge potential and higher foreign investment limit will prove to be an enabling factor, particularly for the private sector, experts said.
Recently, al khaliji, a new generation lender, received approval from shareholders to increase its foreign ownership limit to 49%, ahead of the MSCI upgrade.
“There is no certainty that it will help our bank. But certainly in terms of MSCI index (we don’t know whether we will be part of that index), it could demand additional liquidity on our shares,” al khaliji group CEO Robin McCall said.
