Qatar has strengthened its liberalisation drive by proposing to allow up to 100% foreign ownership in the listed companies, a first of its kind in the Gulf region and a move that may see foreign inflows in excess of $1.5bn, which will substantially enhance the weight of the listed firms in the global indices.
“The decision to raise the percentage of foreign ownership in the shares of Qatari companies will positively affect the liquidity and trading in the market,” Qatar Stock Exchange chief executive Rashid bin Ali al-Mansoori a tweeted.
The move, according to him, would also increase the weights of Qatari companies on global indicators, which in turn, would inject more liquidity and investment flows and will “positively” affect local investors and the listed entities.
“Qatar is the first country to have 100% FOL for all listed companies. Since FOLs are a consideration in the weight of stocks in global emerging market indices, such as those managed by MSCI and FTSE, the increase in FOL will increase the weights of Qatari stocks in these indices,” Akber Khan, senior director (Asset Management Group), Al Rayan Investment.
As a result, funds which track these indices would be forced to buy more and these inflows alone are likely to exceed $1.5bn, according to him. Talal F Samhouri – who is responsible for managing Qatari and the Gulf mandates, including the Doha Bank-sponsored QETF – at Aventicum Capital Management said this decision will help increase foreign ownership in the market, which in turn, will lift the weight of these companies in the emerging market indices (MSCI and FTSE).
Since these indices calculate the weight of each company based on percentage ownership available to investors (local, regional and international), the increase in allowed foreign ownership increases the weight of that company in the index, he said.
Highlighting that the increase translates into new money coming to that stock mainly from international funds to match with the new weight of that company; he said “we are estimating new money will be in the range of $1.2-1.5bn over the course of the next few months, as companies hold their AGMs (general meetings) to adjust their AoA (articles of association) based on the new amendment.”
The draft law, approved by the cabinet, includes the amendment of Article (7) of the law so that non-Qatari investors can own up to 100% of the capital of Qatari shareholding companies listed on the QSE.
Highlighting that the cabinet decision in line with moves to enable non-Qatari investors to set up companies, Khan said the move to increase FOL of listed companies “is another step along the path of liberalisation.
The sector that is set to benefit the most would be banks, according to the experts. “Qatar Islamic Bank, Masraf Al Rayan, Commercial Bank and QIIB are expected to see the lion’s share of inflows,” Khan added.
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