Qatari stocks may see earnings growth of 13.6% in Q1: QNBFS

Earnings for Qatari stocks are expected to grow 13.6 percent year-on-year (YoY) in the first quarter of 2022 on a normalised basis excluding outlier Industries Qatar, QNB Financial Services (QNBFS) has said in a report released on Monday.
Moreover, the report said, on a quarter-on-quarter basis, normalised earnings should also increase by 11.2 percent.
According to QNBFS, the YoY growth in normalised earnings is attributable to a continuously improving operating environment in the first quarter of 2022 against the first quarter of 2021 as oil prices have surged and significant COVID-19 restrictions have been lifted.
In 2021, the report said, the QSE Index appreciated 11.4 percent but underperformed all other GCC markets. However, the QE Index has burst out of the gate rallying 27.2 percent intra-day on April 11, since the start of the year 2022.
The QSE has become the third-best performing index globally with a total return of 31.9 percent.
While initially the market benefitted from an in-line-to-better-than-expected dividend season and strong earnings growth in 2021 after a COVID-19 induced-lull in 2020, the report said, Qatar’s position as a global safe haven along with US dollar-pegged currency and global-powerhouse status in natural gas (LNG) really came into focus as the Russia-Ukraine conflict began in late-February.
Since then, the market has rallied hard, up 17 percent, while foreign institutional investors have already bought up a net $2.375 billion overtaking the entire net foreign investment flows of $2.063 billion achieved during the full year 2021.
The report said, “While we expect the market to remain volatile, we continue to be positive longer-term on the Qatari market due to reasons like 100 percent FOL implementation, rising oil and gas prices, FIFA World Cup Qatar 2022, North Field Expansion Project and investments related to 2030 Qatar National Vision.”
Three banks QIB, QNB and MAR have fully implemented their 100 percent FOL requirements. Hence, these three banks have firmly beaten the deadline for the MSCI and FTSE rebalance. The MSCI and FTSE rebalance could see additional foreign institutional investment flows to the QSE of roughly $1.3-1.5 billion with banks making up close to 90 percent of these inflows.
“Higher oil and gas prices should lead to higher government revenues for Qatar, enable flexibility in government expenditures, and improve overall money supply. Moreover, higher commodity prices continue to heighten investor appetite for Qatari equities,” it said.
With the FIFA World Cup Qatar 2022 finally around the corner, the report said, “We believe the Qatari stock market will benefit from the sheen of this unprecedented success enjoyed by Qatar on the global stage.”
The report said, “The North Field Expansion Project and 2030 Qatar National Vision investments continue to be major growth drivers for local companies. On top of Qatar’s macro strengths, Qatari companies enjoy robust balance sheets backed with low leverage and decent RoEs, whereas Qatari banks stand out with their exceptional capital adequacy ratios, healthy NPLs, strong provision coverage and high profitability.”