Qatar’s safe-haven status, strong fundamentals to attract foreign institutional investors in 2022: QNBFS

Qatar has emerged as one of the most promising markets in the region and worldwide, thanks to positive momentum from the country’s status as a global safe-haven for investors, 100 percent foreign ownership limit (FOL) implementation, rising oil and gas prices, FIFA World Cup 2022 and QatarEnergy’s huge LNG expansion plan, QNB Financial Services (QNBFS) has said in a report released on Wednesday.
The report said, “The Qatar Stock Exchange (QSE) has already outperformed in 2022 with the index gaining by 21.4 percent as of April 12, 2022. The QSE Index has been the best performing index in the GCC region. Further, the Index is also currently the fourth-best performing index globally with a total return of 26.4 percent.”
While stocks are expected to remain volatile, the report said, “We continue to be positive longer-term on the Qatari market. Although Qatari equities have run-up significantly and most of our stocks under coverage have reached or surpassed our price targets, we continue to remain bullish longer-term on several names including Masraf Al Rayan, Qatar Electricity and Water Company (QEWC), Nakilat, Qatar Islamic Bank (QIB) and Milaha.”
Citing Qatar’s emergence as a global safe haven for investors, the report said, “Among the global safe-haven alternatives for investment, the QSE has been a key beneficiary of flight-to-safety for investors looking to sidestep the Russian crisis. The QSE’s net foreign institutional inflows exceeded initial expectations reaching $2.416 billion by April 12. Overall net investment buy activity reached the equivalent of $2.936 billion, already overtaking the entire investment flows of $2.063 billion achieved during 2021.”
The report said that 100 percent FOL implementation by Qatari stocks will see an additional foreign institutional investment of $1.3-1.5 billion.
Three banks Qatar Islamic Bank, Qatar National Bank and Masraf Al Rayan have fully implemented their 100 percent FOL requirements and the Qatar Central Securities Depository has modified the foreign ownership limit for all three of them to be 100 percent of capital.
In our view, the report said, “These three banks have firmly beat the deadline for the MSCI and FTSE rebalance. While it is not certain that all major companies will meet their MSCI cut-off, we remain fairly confident that the market will continue to attract substantial foreign inflows. We note that while any actual MSCI-related flow increase will take place in May at the earliest and FTSE in June, the market should continue to move in anticipation of this major event. The MSCI and FTSE rebalance should see additional foreign institutional investment flows estimated at around $1.3-1.5 billion with banks making up 90 percent of these inflows.”
Highlighting rising oil and gas prices as another positive for Qatar’s economy, the report said, “Sanctions by Western countries on Russia are causing global oil and gas supply concerns, which in turn are having a major impact on global oil and gas prices. With Russia being a major global producer and exporter of gas and oil, the already uneven global supply-demand balance has been put under even further pressure, leading to record-high oil and gas prices.
“Brent crude prices averaged $108 per barrel in March 2022, with LNG prices averaging $16/MMBtu in February 2022. Higher oil and gas prices will lead to higher government revenues for Qatar, enable flexibility in government expenditures and improve the overall money supply. Moreover, higher commodity prices continue to heighten investor appetite for Qatari equities.”
Citing the FIFA World Cup 2022 as an important catalyst in driving the domestic market, the report said, “This major global event is expected to contribute $20 billion to Qatar’s economy, in sectors such as tourism, sports and construction.”
Qatar’s huge LNG expansion plan will drive overall demand and growth, the report said, “Qatar’s significant LNG expansion will drive overall demand and growth over the coming years. The LNG expansion will see Qatar’s overall LNG output increasing by 64 percent to reach 126 million tonnes per annum (MTPA), from the current 77 MTPA. We note that Qatar should remain among the largest global LNG exporters. Qatar exported an estimated 80.2 million tonnes of LNG in 2021; given its current expansion plans, Qatar is expected to be the second-largest LNG exporter in the world by 2027 with 126 MTPA.”