Foreign institutions, whose inflows have expanded after the upgrade of the Qatar Stock Exchange (QSE) to emerging market status, are betting on banks, logistics and building material companies owing to improved macroeconomic outlook of the country.
“We expect listed Qatari companies such as banks, logistics and building material companies to benefit from the general environment and in turn support the overall market,” Salah Shamma, head of investment, Middle East and North Africa Equity, Franklin Templeton Investments (Middle East), told Gulf Times.
Highlighting that the general macroeconomic outlook for Qatar is improving after experiencing a few challenging recent years, he said the country is approaching the much anticipated World Cup in 2022, which would require “significant” investments in infrastructure and logistics.
Most of the projects should be finalised by 2020, and this entails the bulk of the spending and execution to be completed in the next three years, according to him.
“This reality, in addition to the recent lifting of the gas moratorium, should have a positive effect on sentiment and direct investment, and should support the overall growth environment for the foreseeable future,” Shamma said, adding foreign investors expect valuations levels to improve if the expected World Cup spending kicks in and the overall growth outlook improves.
Lifting a self-imposed moratorium on gas development, Qatar, had in April, announced the launch of new development that would increase current production of the North Field by about 10%, adding about 400,000 bpd of oil equivalent to Qatar’s output
The growth trend in the infrastructure and logistics can be gauged from the rising share of non-hydrocarbon gross domestic product (GDP) of Qatar.
According to the International Monetary Fund, Qatar’s non-hydrocarbons sector is expected to grow faster than the underlying real economy. The country’s non-oil GDP growth is expected to be 5.7% this year against the overall GDP expansion of 3.4%.
Qatar’s non-hydrocarbon sector is expected to expand at 5.3% in 2018 (compared to overall 2.8% GDP growth), 4.8% in 2019 (2.3%), 4.2% in 2020 (2%) and 3.8% in 2021 (1.6%).
Refuting views that overseas fund inflows have lacked rhythm despite the QSE’s upgrade, Shamma said the average foreign participation in the market increased from 29% in the first half of 2014, to 34% currently.
“Actually, since the upgrade in 2014, the Qatari market has enjoyed net foreign inflows of $4.2bn,” he said, quoting data from EFG Hermes.
MSCI, Standard & Poor’s-Dow Jones and FTSE Russell had upgraded the QSE into emerging market from the frontier status in view of the fast-paced reforms in the local bourse. QSE chief executive Rashid bin Ali al-Mansoori had said the bourse was eyeing the ‘developed’ market status.
Recently, Doha Bank Group CEO Dr R Seetharaman had said QSE has the potential for $10bn to $15bn overseas fund inflows after the upgrades.
Finding that market valuations are relatively rich versus historical averages, Shamma said local capital continues to support listed companies, given the lack of alternative opportunities currently available.
“Local investors are content generating dividend yields, which are higher than prevalent deposit rates. International investors are less inclined to do so,” he said.


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