Qatar to sell $662m Hong Kong asset to back economy

Qatar is ramping up asset sales as it offloads a $662 million Hong Kong department store operator at the end of March being the most recent divestment as a 10-month Arab quartet boycott of the Gulf state takes its toll.

Doha has been forced to repatriate significant sums from its sovereign wealth fund to shore up its struggling economy, which continues to experience the impact of an economic and political boycott by its Arabian Gulf neighbours and other countries. Saudi Arabia and the UAE, together with Bahrain and Egypt, cut ties with the country on June 5, accusing it of supporting terrorism, a charge it denies. While Qatar has denied the sales are a result of mounting financial pressures following the severing of ties by the Arab quartet over Doha’s support for extremists, liquidity in its banking system has come under strain. Ratings agency Moody’s Investors Service estimated in September that the country had burnt through $38.5 billion of its financial reserves in June and July.

Qatar Holding, a unit of the country’s sovereign wealth fund the Qatar Investment Authority, sold its stake in Lifestyle International Holding and Lifestyle China Group for $5.2bn Hong Kong dollars ($662m) in late March.

The sale comes amid a number of divestitures that Qatar’s sovereign wealth fund has made since June, including a reduction in its stake in Credit Suisse, Switzerland’s second biggest bank, and the luxury jeweller Tiffany.

The sale of 4.4 million shares of Tiffany raised about $417m.

In the case of Credit Suisse, the QIA reduced its stake in the Swiss bank by not participating in its capital increase last year.

In March, Qatari Diar, the property unit of the QIA, said it was selling 26.1m shares in Veolia Environnement for

$38.5bn

Amount Moody’s estimates Qatar burnt after Arab boycott roughly $640m. The state has also put the brakes on new investments.

In August, the country’s flagship carrier Qatar Airways abandoned plans to buy a 10 per cent stake in American Airlines.

The Doha airline expects to post a loss for its current fiscal year as a result of the political rift which forced it to cancel some routes and divert others. The carrier is seeking other forms of financing to survive and may call on its state owner to provide extra funding if the boycott continues, Qatar Airways chief executive Akbar Al Baker told Reuters TV in March. “We will announce a very large loss during the current financial year which ends this month,” he said.

Ali Al Emadi, the country’s Finance Minister, told the Financial Times in October that the Qatar Investment Authority, whose assets under management are estimated to stand at about $300bn, had brought back more than $20bn into the country since the stand-off with its neighbours began in June.

Qatar’s banks had their outlook downgraded to negative from stable by Moody’s in August amid weakening operating conditions and continued funding pressures facing lenders in the wake of a political crisis between the sheikhdom and neighbouring countries.

There have been fears that the Gulf states opposing Qatar may withdraw deposits from the country’s banks, pushing the cost of borrowing higher.