Qatar”s financial markets try to recover from slowdown

The recent period of usual slowdown witnessed a ‘surprise’ rally by QSE stocks.

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Stocks

Every year the Qatar Financial Markets Authority (QFMA), which is the regulator of Qatar’s thriving bourse (the Qatar Stock Exchange or QSE), receives complaints against brokerage firms as well as listed companies and others. The others may, arguably, include senior functionaries of listed companies. The Authority conducts investigations and its committees hold hearings in-camera and seldom does it publicly disclose details such as the nature of complaints it has received and the companies and people involved.

Some investors say that there is a need for the bourse’s regulatory agency to make at least those cases transparent that have a direct bearing on investors. Critics say the QFMA has no doubt effective and extensive rules in place to regulate the bourse which has now been expanding quite fast, but at times it should make announcements about some complaints of alleged manipulation, malpractices or irregularities by brokerage companies or the listed entities and their functionaries, if any such complaints are filed with it and investigated, and action taken.

Inside story

Some investors say the QFMA needs to closely monitor trading on the QSE and ensure speculative trading as part of illegal insider trading (some countries have legalised some forms of insider trading) is not carried out under any circumstances. Illegal insider trading refers to a person with non-public information about a listed company (or information that has not yet been made public by a company) and he may trade in its stocks and benefit at the expense of other investors.

As an example, a company may be finalising a deal with another company and after the deal has been signed the shares of the company or of both the companies (if both are publicly traded) could go up in value. A person aware of the deal in advance can buy the shares of the company (or of both the companies) before the deal is inked and could sell them when the agreement is signed and their share prices have gone up, thus making a quick buck.

The QSE, however, has strict rules as regards company information that may influence their share prices and makes it legally obligatory for companies to make such information immediately public. The QSE instantly posts such information on its website.

Ramadan rally

Meanwhile, the month of July was not uneventful as regards the QSE and trading sentiment, although in the month of Ramadan which this year fell in June and July, share trading generally remains subdued. This year Ramadan began from 18 June but instead of witnessing dull sessions, the QSE actually showed some rally in the initial days of the fasting month. Of course, there were days of highs and lows and there were days when trading sentiment was subdued and there was the habitual pre-Eid Al Fitr sell-off.

Some selling pressure was witnessed in the beginning of July, in the pre-Eid period. Such was the pressure that in the first few days of trading in July a bearish QSE saw its market capitalisation shed as much as QR 17 billion (USD 4.67 billion). The cap fell to QR 628 billion (USD 172.45 billion) within four days of trading in the month in what some stock brokers said was pre-Eid sell-off, coupled with global sentiment. As a result, the QSE’s main index was down to 11,787 on 8 July, a Wednesday.

That was also the time when the Ministry of Development Planning and Statistics said in a statement issued that Qatari stocks were expensive as compared with those on other regional bourses. A local English newspaper reported on 8 July quoting Kuwait-based Global Investment House (GIH) that the ministry’s statement put pressure on the QSE index as investors dragged their feet.

Interestingly, as noted earlier, the little rally the Qatari stocks showed at the beginning of Ramadan and which continued until almost the end of June surprised some stock analysts since that happens quite rarely in this part of the world where business activities slowdown in the holy month. “Indeed it was a surprise,” a source from a brokerage firm said in remarks to BQ.

When the market reopened after the weekend closure, the QSE’s benchmark index jumped in quite a dizzy to breach the psychological barrier of 12,000 points to 12, 031. The rise was 1.12 percent or by 133 points. The prime mover was the real estate sector. The sector surged 3.84 percent with Ezdan taking the lead, gaining 5.8 percent. Barwa Real Estate Company and the United Development Company (UDC) had also shown some gains. The rally was a result of bullish positions taken by foreign institutional investors (FIIs), according to some analysts.

QSE stocks slumped a little in the days that followed and then rose again and by the middle of July reports came in that by the end of second quarter (Q2 of 2015), the Qatari and other GCC markets had stabilised following nearly a year of volatility fuelled by falling world oil prices. As crude prices have been stabilising after their sudden fall in June 2014, so have the GCC stock markets, including the QSE, the reports said.

The main index of the QSE was again back to 12,020 points by mid-July, with the market capitalisation being QR 636.26 bn (USD 174.72 bn), from QR 634.2 bn (USD 174.15 bn) a day earlier. Stock analysts attributed the rise to investors preparing for a long Eid break.

By the first week of August, after a week of a bearish run, the QSE index was down again, ruling below 12,000 points, at 11,770.25, with the market capitalisation being QR 624.39 bn (USD 171.46 bn).

Stock brokers say that once the long summer break came to a close by August-end and people begin returning from overseas vacations, Qatari stocks should show at least some rally.

A little buoyancy is also expected because second quarter (Q2, 2015) results of companies have so far been encouraging.

Analysts say that the full impact of the inclusion of the QSE in the MSCI Emerging Market Index and in the Standards and Poor’s Index is yet to be realised. Last year, when the QSE was included in the coveted MSCI Index and conferred the Emerging Market status, falling world oil prices had played a spoilsport. That was in June of 2014. The QSE, in the MSCI Emerging Market Index, now enjoys the largest weightings of a financial market in the Middle East. All eyes are then on this potential to be realised by the QSE.

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