Qatari Shares Set for More Gains Amid Talks to End Gulf Rift

(Bloomberg) -- Qatari stocks are likely to see further gains after the gas-rich nation said it had made progress towards ending a rift that has disrupted commercial ties and complicated business in the Persian Gulf for more than three years.

The country’s benchmark QE Index rose 1.5% on Sunday to close at its highest level since January after Saudi Arabia and Qatar moved closer to a preliminary rapprochement. Riyadh had severed diplomatic and trade ties with Doha in June 2017.

“With the rift looking to be ending soon, the biggest beneficiary should be Qatar Stock Exchange,” said Talal Samhouri, senior portfolio manager at Doha-based Aventicum Capital Management Qatar LLC. Shares in Qatar trade at cheaper valuations than those in Riyadh, making them more appealing, he said.

The long-running spat disrupted trade and travel in the world’s top oil-producing region, and forced airlines to reroute traffic. The QE Index slumped 18% in 2017 -- its biggest annual decline since the global financial crisis -- and has underperformed Saudi Arabai’s main Tadawul Index over the past three-and-a half years.

As talks between the two nations advance, these are some stocks in Doha that will be in the spotlight:

• Shariah-compliant banks

Lenders including Qatar International Islamic Bank QSC and Masraf Al Rayan QSC are among those that could benefit from the return of Saudi Arabian clients who prefer Shariah-compliant banks. The two lenders rose 2.4% and 0.5% on Sunday, respectively.

• Baladna

The dairy and meat producer that flew cows into the country to overcome the trade boycott fell 1% on Sunday, the most among 20 members of the QE Index. It could face increased competition from Saudi Arabia’s Almarai Co., which is about 15 times bigger by market capitalization.

• Industries Qatar

The petrochemical company, which has the third-biggest weight in the Qatari benchmark index, trades at a higher valuation than peers in Saudi Arabia. It could be vulnerable to a decline after a 2.3% gain on Sunday, as investors look at other Qatari stocks.

• Diversification

Qatar Gas Transport Company Ltd., Qatar Fuel QSC and Gulf International Services QSC are “unique investments, and they offer Saudi investors better diversification and entry into new sectors,” according to Samhouri

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