Exchange traded funds (ETFs) are set to gain traction in Qatar with Doha today witnessing the launch of first such instrument 'QETF', which is sponsored by Doha Bank.
The market is expected to give a rousing welcome to the fund, which comes about six years after the Qatar Financial Market Authority outlined the broad legislative contours.
The debut of QETF, which tracks the 20-stock Qatar Index, comes at a time when global fund houses are increasingly showing interests in the country's capital markets in view of the macroeconomic potential and despite the economic blockade.
Doha Bank group chief executive Dr R Seetharaman had last year said Qatar has the potential for $10bn to $15bn overseas funds inflow since its upgrade into emerging market.
The country’s decision to lift the moratorium on North Field as well as faster growth in the non-hydrocarbons sector, especially multi-billion dollar infrastructure development, all augur well for the growth, sources said.
The nominal value of the QETF, an open-ended investment fund regulated by the QFMA and the Qatar Central Bank, is one-hundredth of the aggregate value of the index as of the close of trading on the dealing day immediately prior to the launch date.
Considering that the 20-stock Qatar Index closed at 8,730.06, the indicative unit price of QETF would be QR87.3, which according to sources, would appeal to investors and further movement would depend on the market makers. The total expense ratio of QETF would not exceed 0.5% of the average daily net assets of the fund, its prospectus said.
One of the advantages with an ETF is relating to its fee, which tends to be lower than for the mutual funds, sources said.
The move to launch ETFs comes in view of an analysis of 300 individual portfolios undertaken by the QSE in which it found that the portfolios underperformed the index. Similarly, mutual funds, which often have higher management fees, were also seen underperforming the index.
"The (ETF) products provide easy access for those wishing to take long exposure to Qatar markets but will also attract intraday traders looking for arbitrage," according to Hamad al-Maadadi, chairman of The Group, which has been selected as the liquidity provider for QETF.
Finding scope for ETFs in Qatar as international investors are interested in bringing money, a top official of a global investment management firm said a lot of asset managers within the domestic banks are also looking for ETFs for enhancing liquidity and diversifying their product portfolio.
"There has been a lot of investor attention focused on the Gulf Cooperation Council but the problem is with the heterogeneous nature of individual markets within the region,” he said.
Apart from QETF, another fund that tracks Shariah-principled stocks and sponsored by Masraf Al Rayan is expected to foray in Qatar's market, whose capitalisation is more than $128bn. An ETF based on government fixed income risk from an Asian borrower has also been reportedly in the pipeline. There are also indications that the Qatari bourse may see ETFs based on securities whose primary listing is overseas.
