“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

Qatar Today - - LISTENING POST - BY V L SRINI­VASAN

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.

New list­ings

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

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