As global investors eagerly await Saudi Arabia’s USD 500 billion-plus stock market to open up to direct foreign investment on 15 June, analysts feel this is not the right time to do so because of the twin factors that are currently adversely affecting Saudi stocks – declining world oil prices and the problem with Yemen.
The Saudi capital market authorities, however, are going ahead with plans to open up the Arab world’s largest equity exchange to direct foreign capital and hope the move will attract inflows of some USD 24 billion since the market remains one of the most robust in the entire Middle East.
Early last April there were reports that did not bode well for the GCC states sans Qatar where falling oil prices so far had little impact on the stocks. In fact, as crude rates improved in the month (April) Qatari shares surged. As for overall GCC stocks, forecasts suggested a nine percent year-on-year drop due to falling petrochemicals sector profitability fuelled by low global oil prices. Saudi shares were no exception as sectors such as real estate and construction, retail and hospitality were also forecast to suffer.
But Qatari stocks remained unscathed largely because of encouraging first quarter (Q1) results, improving oil prices and geopolitical stability, financial analyst, Ahmed Aqueel, told Saudi Arabia’s popular business portal Mubasher. “The first quarter financials (of Qatari companies) have been good and that has propelled the market,” Aqueel briefly said.
After companies began reporting their financials for Q1 (January to March 2015) in April, the main benchmark index of the Qatar Stock Market began looking up and turnover increased.
At the end of the month investors’ wealth, or market capitalization, surged by almost QR 20 billion (USD 5.5 billion), or by 3.2 percent, to QR 653.76 billion (USD 180 billion).
The index gain was 3.8 percent in the month to 12,164.48 points, from 11,711.40 as on 31 March, 2015. An anlayst told bq magazine one of the main contributors to the return of buoyancy on the Qatari bourse was that the framework nuclear agreement Iran signed with the US and other countries actually led to some cheer in the global oil market as well.
But the analyst warned that for as long as world oil prices would remain in the range of USD 60 to USD 70 per barrel there were little chances of any major surge in Qatari shares. “We can only expect moderate growth if oil prices don’t look up beyond USD 70 a barrel which is highly unlikely in the near future,” the analyst said.
Listed companies fare well
Much of the liquidity right now is moving into real estate in Qatar where the action is. The return on investment is by far massive but the sector has been saturating fast. As expected, Qatar’s largest lender, Qatar National Bank which is half state-owned, led the Q1 financials, reporting an impressive QR2.7 billion in net profits. The bank’s profits were up by more than 10 percent on the back of increased loans and advances.
Interestingly, one of the top gainers in the month (April) was the Qatari German Company for Medical Devices which manufactures and markets medical equipment such as disposable syringes and saline solutions for local use as well as exports to the GCC and other countries. The shares of the company gained as much as 23.11 percent, or by QR 2.44, to QR 13.
More than nine million shares of the company were traded in April with a total value of QR 118.65 million (USD 32.58 million) across as many as 3,726 deals. The top gainer in the month was Qatar Investors’ Group (QIGD) which surged by an unrivalled 24.25 percent, with its share price going up by QR 9.35 over 20 days of trading to QR 47.90. The QIGD is simply known as the Investors and basically deals in construction materials through many of its subsidiaries.
Gulf Warehousing Company was the third largest gainer in the month, with its stock price going up by QR 13.10 in just a month, showing a 21.91 percent increase, to QR 72.90. The company announced its Q1 results late in April. Its net profits showed a 40 percent jump to QR 40 million, from QR 28.9 million in the same period of 2014.
A shortage of warehousing facilities in the country apparently helped the company push its profits. The company is expanding its facilities and services. Medicare Group which owns Al Ahli Hospital was another major gainer in the month with its stock price soaring to QR 172.10 showing a 20.9 percent surge. Al Meera chain of consumer cooperative stores and Barwa Real Estate were the other gainers in the month.
Al Meera, Qatar Electricity and Water Company (QEWC), producers of the precious utilities, and QNB continue to have the highest share prices of QR 246.90, QR 212.10 and QR 198, respectively, while the lowest share price was that of Qatari German Company for Medical Devices, at QR 13. Salam International followed closely (QR 13.90) while other shares that were quoting in April under-QR 20 included Vodafone Qatar (QR 16.90), Mazaya (QR 18.87), Aamal (QR 16.27) and Qatar Oman Investment Company (QR 15.65).
Meanwhile, the administration of the Qatari bourse has begun giving trading figures of GCC retail investors as well as corporates and institutions along with those of local and foreign investors.
The move follows a law that was passed recently which says that GCC investors should be treated on par with their Qatari peers. On 1 April, 2015, for example, the ratio of GCC investors in total buy volumes was 8.99 percent while those of non-Qataris was 40.41 percent and of Qataris, 50.60 percent. Nearly a month later, on April 29, the above percentage was 8.39.
Buying support, meanwhile, continues to be strong from foreign investors who include corporates, institutions as well as the big portfolio and pension funds. Analysts, however, say it is to be seen what impact the opening up of the Saudi stocks to direct foreign capital may have on Qatari equities. Some analysts are of the opinion that it won’t have any impact since Qatari securities have their fundamentals intact.