(Bloomberg) -- Qatar National Bank QPSC is no longer being punished for a boycott imposed on the country by some of its neighbors as this month’s MSCI Inc. weighting change draws passive inflows to the stock.
A 36 percent rally spurred by the decision to raise the foreign ownership limit in March means QNB now trades at a similar valuation to First Abu Dhabi Bank PJSC for the first time in more than a year. FAB had become one of the shares of choice in the United Arab Emirates after a deal that created the country’s biggest lender last year.
The estimated price-to-earnings ratio for the Emirati bank has slipped to 10.3, matching the level for QNB, the dominant stock in Qatar’s benchmark index.
QNB and FAB are “the two biggest single-security index trades” for 2018 in the Middle East and North Africa, according to Mohamad Al Hajj, an equities strategist at the research arm of EFG-Hermes Holding in Dubai.
The Qatari lender could attract inflows of $651 million after the index re-balancing, which was triggered by the bank increasing the maximum foreigners can hold to 49 percent, he estimates. FAB could draw more than $300 million in passive flows after a review of its weighting in the same index, expected to be announced in November, he said.
The Abu-Dhabi based bank is the result of the merger of First Gulf Bank PJSC and National Bank of Abu Dhabi PJSC, which at completion had created a financial giant with $180 billion in assets under management.
The Emirati lender remains an interesting play following the stock’s recent dip, especially considering the “ that will be generated by the merger,” said Ali El Adou, the head of asset management at Daman Investments in Dubai.
FAB fell 0.4 percent as of 10:36 a.m. in Abu Dhabi, after climbing 7.9 percent in the previous three sessions, while QNB was little changed in Doha. They have a market valuation of $36 billion and $40 billion, respectively.
©2018 Bloomberg L.P.
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