“MILES TO GO BEFORE WE SLEEP.....”
QATAR’S ECONOMY HAS GONE THROUGH POSITIVE CHANGES IN THE LAST TWO DECADES AND ITS GROWTH IS BASED ON BUILDING A ROBUST, DIVERSIFIED ECONOMY AND SUPPORTING THE GROWING ROLE OF THE PRIVATE SECTOR IN INCREASING PRODUCTION AND INVESTMENT, SAYS QATAR STOCK EXC
However, he says the role of the private sector as one of the pillars of diversifying income sources has not thus far reached the desired level and much remains to be done to develop it. The responsibility for doing so rests with both the government and the private sector. “Therefore, an efficient and well established capital market contributes to the growth of the economy since it facilitates efficient capital allocation, allocating funds to those projects and companies that generate the highest return,” Al Mansoori says.
QSE supports Qatar's financial sector by offering a platform for the government's privatisation programme, supporting familyowned companies, and offering a diversified range of products for local and international investors. QSE has initiated a dedicated SME Venture Market for many Qatari SMEs seeking corporate growth and expansion. In addition, QSE facilitates companies and the government to raise capital and offer investors an efficient platform for asset allocation (capital formation and capital allocation).
“Based on the above, we can see that the Exchange measures and controls the growth of the national economy. Thus, the Exchange is a barometer of the economy since it maintains the stock indices which are the indicators of the general trend in the economy,” he says.
The bourse can also benefit small investors through allowing them to participate in the growth of large companies, by buying a small number of shares. This will allow the public to mobilise their savings to invest in high-yielding economic sectors. In the last three years after he joined QSE, Al Mansoori has initiated many changes in the day-to-day functioning of the bourse and they include bringing more transparency, encouraging new companies to go for Initial Public Offering (IPOs), and launching a second market for the Small and Medium-sized Enterprises.
The one area where he is yet to taste success is luring new companies to get listed on the Stock Exchange but he is leaving no stone unturned. Al Mansoori feels that there is a lot more ground to be covered to put QSE among the top bourses in the world and is working
towards achieving the goal.
“The MSCI Emerging Markets Index, which is tracked by investors with more than QR21.84 trillion ($6 trillion) in assets, has upgraded Qatar to emerging market status alongside Brazil, Russia, India, China and South Africa,” Al Mansoori says.
MSCI Emerging Markets is the most widely used index by investors in developing markets. Because much of the funds tracking the index are passive investors, inclusion in the index compels additional capital to be funneled to the markets it covers.
He says the upgrade will attract additional international investors, support the market liquidity and thus benefit listed companies and the other investors. “For example, we have already seen an increase in accounts opening with the Exchange by foreign institutions and gradually these will increase their investments in the market, especially the stocks that had been included in the MSCI EM index,” he avers.
Al Mansoori points out that analysts estimate Qatar could attract around QR3.64 billion ($1 billion) in total of additional foreign funds because of the MSCI decision. There has been a clear increase in interest in Qatar overall and its listed companies both before the formal inclusion and thereafter. This was evident when QSE held road shows in 2014 and 2015 where there was increased interest to meet the QSE-listed companies from a broader spectrum of investors including some who had not looked at Qatar in great detail previously.
“In 2013, the year prior to the reclassification, foreign institutions accounted for 22% of our trading volumes. Last month (May 2015), that number was up to 29%. That's a 30% increase notwithstanding the fact that overall volumes have doubled over the same period,” he explains.
On foreign firms getting listed on the QSE, Al Mansoori says that the bourse is an international exchange with strong domestic roots. “Regionally we are confident that QSE is now positioned and recognised as one of the leading exchanges, while globally we will keep working hard to establish ourselves as one of the most attractive stock exchanges for investors around the world taking advantage of our solid and advanced infrastructure and the fast-growing economy of our country.
“The increase of the FOL from 25% to 49% is positive for the Qatari market because it is an attempt to increase their share or exposure to the emerging markets index. This also indirectly opens up Qatar's energy and banking system to more strategic investors, especially in view of the fact that Qatar is a rich country with immense wealth and its banking sector is a profitable one,” he says.
He says new listings are the fuel of the Exchange and of trading. That's why they encourage new listings on the QSE market and the Venture Market dedicated to SMEs. In the region, 80% of businesses outside of the oil industry are family-owned, and so the QSE held various conferences, aiming at explaning listing.
“The government is also encouraging companies considering an IPO through various incentives and planning some state-owned entities to go for IPOs. Generally, the government selects profitable companies to privatise, because this is what encourages people to rush for a slice of the cake. Unlike some other countries that might attempt to privatise companies that are losing in order to shed responsibility for them, in Qatar it is about encouraging diversification and boosting the wealth of the country for the benefit of its people,” Al Mansoori says.
Citing the success of Mesaieed's listing, which is likely to pave the way for more IPOs in Qatar in the near future, he says the government wants to use IPOs to develop the financial markets and promote the culture of stock investment among citizens. For its part, QSE provides any company wishing to list with enormous technical and operational support.
He says the government is planning to bring companies to the market in the coming years and in this regard he points out that Qatar Petroleum (QP) was contemplating a series of IPOs for its subsidiaries over the next 10 years. “The Mesaieed Petrochemical Holding IPO is not an isolated event but is part of a series of IPOs that QP intends to undertake during the next 10 years. This plan is within the context of the investment and savings programme that seeks to offer Qatari citizens the opportunity to share
the country's current and future wealth,” he says.
It is not that the QSE officials are satisfied with the developments. They are implementing several initiatives to boost and maintain liquidity in the market. Of particular note is the recently implemented liquidity provision scheme which allows for both exchange and issuersponsored programmes. They are also working hard to encourage further IPOs, advising both government and corporate entities on the benefits of listing.
“The MSCI upgrade has had a positive impact on our liquidity and we believe our other initiatives will further boost our performance in the months to come. Our average trading turnover has increased by over 180% y-o-y and we continue to see burgeoning interest in index constituents. As to the proposed stock split, we believe that this will go through as it is supported by senior decision makers, the regulator and ourselves. However, I cannot give you a specific date for its implementation because it is subject to regulatory approvals,” Al Mansoori says.
Crisis may not come from within the market or from the region but from troubled spots like the eurozone which is facing the gravest threat from economies like Greece besides stunted global economic growth in the next two years.
Still, QSE has drawn up priorities to stimulate liquidity and enhance the free float available for trading and attracting more family-owned firms to the market in the near future. The bourse is also seeking liquidity expansion and business
We expect to continue serving the local economy in terms of capital formation and capital allocation. We believe in the importance of a local exchange meeting the needs of local companies and local investors. At the same time we recognise the importance of international participation in our market and we will continue to offer easy access to foreign investors.”
RASHID ALI AL MANSOORI CEO Qatar Stock Exchange