BROADER AND DEEPER

Af­ter sev­eral years spent some­what in the dol­drums, Qatar's as­set man­age­ment sec­tor is spark­ing back to life, with a rash of new moves co­in­cid­ing with a wave of pos­i­tive head­lines from the coun­try's cap­i­tal mar­kets.

Qatar Today - - BUSINESS > VIEWPOINT - BY OLIVER CORNOCK The au­thor is the Re­gional Edi­tor of Ox­ford Busi­ness Group.

These de­vel­op­ments have been wel­comed by those seek­ing to raise Qatar up the global bourse league ta­ble, promis­ing as they do to boost in­ter­na­tional at­ten­tion and mar­ket cap­i­tal­i­sa­tion. In­deed, find­ing ways to deepen and widen the cap­i­tal mar­kets has long been a chal­lenge – as well as an ob­jec­tive – of Qatar's fi­nan­cial au­thor­i­ties, along with its bro­ker­ages and banks.

Much still needs to be done, though, if Qatar is to mount a suc­cess­ful chal­lenge to other re­gional ri­vals. Cre­at­ing big­ger funds and of­fer­ing a wider range of prod­ucts are two of the main ways this can be done, while keep­ing the mo­men­tum go­ing on pri­vati­sa­tion – and the con­se­quent list­ing of ma­jor out­fits – is also a key chal­lenge.

Mar­ket moves

One of the most pos­i­tive pieces of news in re­cent times from the Qatari cap­i­tal mar­kets was, of course, the MSCI up­grade that came at the end of May.

Mov­ing from the Fron­tier Mar­kets to Emerg­ing Mar­kets in­dex had been widely an­tic­i­pated, too, with a ma­jor surge in in­vest­ment into the Qatar Ex­change (QE) by ac­tive for­eign funds and lo­cal in­vestors no­tice­able since the start of the year.

The also widely-ex­pected im­me­di­ate ef­fect of the up­grade was, how­ever, a drop in the QE In­dex im­me­di­ately, as in­vestors reap­praised stocks that had be­come over-val­ued in an­tic­i­pa­tion of the MSCI hike. This too was largely an over-com­pen­sa­tion, though, with the mar­ket bounc­ing back at the start of July. The over- and un­der-cor­rec­tion process was still on-go­ing at the time of writ­ing.

In the lead up to MSCI up­grade though, some key an­nounce­ments had also been made in the as­set man­age­ment (AM) seg­ment.

May saw an an­nounce­ment from the QE that this year would see the bourse list its first Ex­change Traded Funds (ETFs). QE CEO Rashid Al Man­soori told OBG that two ETFs are to be listed – the first based on govern­ment fixed-in­come risk from an Asian bor­rower, and the sec­ond based on a rep­re­sen­ta­tive Qatar-coun­try in­dex. The hope was that these would be listed in the sec­ond half of 2014.

These two ETFs are also to be some of the largest in the re­gion, ac­cord­ing to bourse officials. Their launch comes on the back

of the suc­cess of the iShares Qatar ETF, launched just ahead of the MSCI up­grade.

News also came in May of plans to in­crease the limit on for­eign own­er­ship of QE listed com­pa­nies, from a nor­mal cur­rent level of around 25% to 49%. While still short of grant­ing pos­si­ble ma­jor­ity con­trol, the move was widely wel­comed for cre­at­ing more room in the in­dex for for­eign in­vest­ment.

Taken to­gether then, re­cent months have seen some ma­jor shifts in the na­ture of Qatar's cap­i­tal mar­kets – all of which should have a pos­i­tive ef­fect on the AM seg­ment. This has in the past been rather mori­bund, although since 2012, there have been signs of a po­ten­tial re­vival.

Back then, Bar­clays Nat­u­ral Re­source In­vest­ments (BNRI) an­nounced it had formed a strate­gic part­ner­ship with the Qatar As­set Man­age­ment Com­pany (QAMC), with BNRI set­ting up an of­fice in Doha and QAMC in­vest­ing $250 mil­lion (QR910 mil­lion) in BNRI's cur­rent and fu­ture port­fo­lio of com­pa­nies. This was the first strate­gic part­ner­ship for QAMC, it­self a col­lab­o­ra­tion be­tween the Qatar Fi­nan­cial Cen­tre Au­thor­ity (QFCA) and the Qatar In­vest­ment Au­thor­ity (QIA).

Another ma­jor for­eign/Qatari tie up in the AM field is Aven­ticum Cap­i­tal, a joint ven­ture be­tween Credit Suisse and Qatar Hold­ing, which launched its first, $500 mil­lion (QR1.8 bil­lion) Qatar-based, Fron­tier Mar­kets busi­ness in July 2012. Aven­ticum also more re­cently an­nounced it was launch­ing a sec­ond fund, Aven­ticum Al­ter­na­tive Eq­ui­ties - a long/short Euro­pean eq­uity op­er­a­tion - from its Geneva of­fice.

These two funds are sig­nif­i­cant be­cause they are both large, pos­ing a chal­lenge to lo­cally-based AM com­pa­nies.

One of the most suc­cess­ful of these is Amwal, whose two Qatar Gate Funds – ‘N' and ‘Q' – have been good per­form­ers. Qatar Na­tional Bank (QNB) has its Al Watani funds and QNB Debt Fund, while In­vest­ment House – which launched Qatar's first Is­lamic fund – is also in the mar­ket, as is Com­mer­cial Bank of Qatar, Mas­raf Al Rayan Bank, Doha Bank, and Barwa Bank. In to­tal there are some 12 lo­cal funds cur­rently listed.

When it comes to com­pet­ing with the large, in­ter­na­tion­ally linked funds, though, lo­cal firms have to bat­tle some dis­ad­van­tages.

First, there is the is­sue of costs. Lo­cal fund man­agers of­ten have to charge higher fees, as they are un­able to spread their costs around as widely as in­ter­na­tional play­ers.

Then there is the volatil­ity of lo­cal cap­i­tal mar­kets – as ev­i­denced by the QE's per­for­mance this year. The large num­bers of re­tail in­vestors lies be­hind much of this, with in­dexes ris­ing and fall­ing as these play­ers buy or dump eq­ui­ties. This makes AM a less pre­dictable af­fair.

The lo­cals can of­fer one key ad­van­tage, how­ever; their lo­cal knowl­edge and ac­cess, with wealth man­age­ment of­ten in­volv­ing re­la­tion­ships with a few, of­ten very pri­vate, in­di­vid­u­als. In­deed, one of the tra­di­tional weak­nesses of AM in Qatar has been that fam­i­lies, who of­ten run some of the wealth­i­est busi­nesses, are re­luc­tant to place their in­vest­ments with out­siders, such as AM com­pa­nies.

Another cru­cial point in the fur­ther devel­op­ment of the AM sec­tor will be the widen­ing of the bourse it­self with more list­ings, par­tic­u­larly of some of the ma­jor and at­trac­tive busi­nesses still await­ing pri­vati­sa­tion.

“The pri­vati­sa­tion and IPO list­ing process is on-go­ing,” Fahmi Al­ghus­sein, CEO of Amwal, told OBG. “This will pro­vide sup­port to the In­vest­ment Bank­ing, Bro­ker­age and As­set man­age­ment in­dus­try lo­cally, in­crease the breath and depth of the Qatari mar­ket and re­duce the con­cen­tra­tion risk for in­vestors.”

More IPOs of big hit­ters would draw ma­jor in­ter­est glob­ally, widen­ing the pos­si­bil­i­ties for AM. Widen­ing the bourse with more prod­ucts would also as­sist in AM devel­op­ment, in­creas­ing port­fo­lios to in­clude real es­tate as well as other prod­ucts.

In the mean­time, Qatar will be up against stiff com­pe­ti­tion from other re­gional mar­kets, most no­tably those in the UAE which was also up­graded at the same time by MSCI.

PwC re­cently es­ti­mated that by 2020, as­sets un­der man­age­ment in the MENA re­gion will be 2.5 times greater than in 2012, at around $1.5 tril­lion. The prize is there­fore a great one – if Qatar can find the means to win it

Newspapers in English

Newspapers from Qatar

© PressReader. All rights reserved.