Qatar Stocks Up Amid Steps to Raise Foreign Ownership

(Bloomberg) -- Qatar’s main index posted its best two-day performance since December 2014 as two benchmark heavyweights prepare to raise the limit foreigners can own of their stock, a step that could lead to millions of dollars in inflows from investors tracking emerging markets equities.

The QE Index gained 1.6 percent in Doha on Tuesday, bringing its gains for the past two sessions to 6.7 percent. Industries Qatar QSC advanced 4.6 percent after saying it’s increasing foreign ownership limit to 49 percent from 25 percent. Qatar National Bank QPSC, which said a day earlier that it’s seeking shareholders approval for a similar change, rose 6.9 percent. Both stocks, which together represent about a third of Qatar’s main index, rose 10 percent on Monday, powering the benchmark to its best performance since 2016.

Qatar Stocks Up Amid Steps to Raise Foreign Ownership

QNB’s weighting in emerging market benchmarks compiled by MSCI Inc. and FTSE Russell could increase considerably with the higher cap for foreigners, and spur passive inflows of at least $730 million, according to analysts at Arqaam Capital Ltd. and EFG-Hermes Holding. Amwal LLC, an asset management firm in Doha, sees a higher weighting as beneficial in keeping Qatar on the radar with emerging markets investors.

  • Arqaam Capital analysts Michael Malkoun, Jaap Meijer and Janany Vemadeva wrote in a report that the bank is seen as having “the most resilient business model” in the country.
  • A cap of 49% could attract $867 million in passive flows for QNB and about $185 million for Industries Qatar, according to Mohamad Al Hajj, strategist at EFG-Hermes
  • “The move protects Qatar’s weight as a whole on both MSCI and FTSE EM indexes,” said Rami Jamal, a portfolio manager at Amwal in Doha. “This is a very positive move as it attracts foreign investments.”
    • Said QNB has been “very resilient” in the past few years, helping it overcome the “current political situation”; said investors had begun to doubt Qatar’s place in the EM space, especially with Saudi and Kuwait poised for inclusion in emerging market indexes this year,” which will reduce the weight of Qatar and the U.A.E. “significantly”.
    • NOTE: FTSE Russell included Kuwait to its emerging markets category last year, and is expected to announce a decision on a potential inclusion of Saudi Arabia on March 28. MSCI will decide on a potential inclusion of Saudi Arabia in June
    • “On a regional level, the larger the foreign ownership limit, the larger the weight in emerging markets and frontier markets indexes, which keeps the region actively visible on the radars of global asset managers,” Jamal said.

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  • Earlier: Qatar, UAE May Draw $4.6 Billion With More Foreign Stock Owners

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