Net profits of Qatar’s publicly traded companies took a slight plunge in 2015 as compared to the previous year. The companies reported collective net profits of QR43.9 billion, or 12.05 billion US dollars, in the year; a marginal 3.6 percent less than QR45.6 billion worth of collective profits in 2014. Analysts attributed the fall in the combined net profits of the companies in 2015 to low oil prices in world markets.

The 2015 profits did not include Vodafone figures as the telecom service provider has its fiscal year from April 1 to March 31. There are 43 companies listed on Qatar Stock Exchange, so the net profits reported last year were of 42 companies.

Meanwhile, March turned out to be a good month for Qatari stocks as they rose 4.89 percent. The main benchmark index of the equity market breached the psychological barrier of 10,000 points and surged to 10,376.20 on 31 March. Investors’ wealth or market capitalization of the bourse jumped, too, to a little over QR 554 billion, or 152.13 billion US dollars.

More than 30 of the 43 stocks showed gains in the month. Among the sector indices, the largest gain (12.6 percent) was registered by real estate sector in the month. The main drivers of growth in this sector were Mazaya and Ezdan, which gained 19.25 percent and 18.49 percent, respectively. There are four stocks listed in the real estate sector – the two others, UDC and Barwa, fell in the month.

The second largest gain (11.24 percent) was shown by Al Rayan Islamic index. Sector-wise, though, the telecom shares were the next top gainers as they rose 10.5 percent. Needless to say both Ooredoo and Vodafone stocks led the rise in the index of this sector. These are the only two shares listed on this counter and both rose – Ooredoo by 4.49 percent and Vodafone by 19.84 percent. Banking and financial stocks rose, too, but the growth was lower at 4.28 percent.

Gainers and losers

The largest single gainer was Qatari Investors Group. Its shares rose a record 51.15 percent to QR 59.40. The second largest gainer was Dlala Brokerage whose shares rose 43.47 percent to QR 19.01. National Leasing was the third largest gainer, the growth being 31.96 percent. Its shares closed at QR 16.60. Gulf Warehousing was the next largest gainer. Its stocks rose 29.58 percent to QR 58.70.

Losers in the month included Doha Bank, Commercial Bank, Al Mannai Group, Qatar Industrial Manufacturing and local petroleum products distributor, Qatar Fuel, popularly known as Woqod.

There were 123,000 deals struck on the exchange in the month with the trading value adding up to over QR 9 billion and the volumes totalled 268.63 million shares. Banking stocks had a share of more than a third (QR 3.4 billion) in the total trading value, followed by industrial stocks. Their share in the total was QR2.02 billion.

Industrial shares surged 8.22 percent in March as evidenced from this sector’s index which rose as much. As noted earlier in this write-up the top gainer on this counter was Qatar Investors Group.

Indices increasingly important

In the meantime, Qatar is all set to join the coveted Emerging Market Index of FTSE in two stages – in September this year and then in March 2017. Akber Khan, senior director, Asset Management at Al Rayan Investment, said in a column which appeared in a local English-language daily early in April that the above inclusion could lead to QR 1.5 billion worth of foreign buying of Qatari stocks in September alone.

He said that when the UAE and Qatari stock markets were included in the MSCI Emerging Market Index in June 2014, foreign investors are estimated to have been net buyers of stocks in the two countries worth 3 billion US dollars.

Talking of the significance of indices, he noted that across Emerging Markets there is frequent reference to indices such as the QE Index, the S and P 500, or MSCI Emerging Markets.

“Indices have become increasingly important in shaping investor behaviour as they are a guide for asset allocation decisions for tens of thousands of fund managers,” Khan said, and went on to add: “Trillions of dollars of investments follow indices, so if an index provider includes shares of a country in a regional index, fund managers who reference that index would likely invest in that country.”

So if a market index is designed well, it can be an effective gauge of an economy and a useful leading indicator of economic health, Khan said in his column. He said within the QSE index suite the main benchmarks are the QE Index and the QE Al Rayan Islamic Index. While the QE Index is a conventional index of the 20 largest and most liquid stocks, Al Rayan is a Shariah-compliant index of Qatari companies with attention given to sector diversification, index concentration of individual names and stock liquidity.

Apart from avoiding conventional banks and insurance and companies that rely heavily for borrowing from conventional banks or bonds, Shariah screening is a formalised risk management framework which prevents a fund manager from investing in companies that may be potentially very risky, Khan said. It is, therefore, not surprising that Qatar’s Islamic Index has significantly outperformed its conventional peers, he noted. Over the past three, five and seven years, the QE Al Rayan Islamic Index has outperformed the QE All-Share Index by 24 percent, 58 percent and 126 percent, respectively, he said.

The story doesn’t end here. The good news, said Khan, is that to enable investors to capture this stellar performance Masraf Al Rayan will soon list a stock on the QE whose performance will track the performance of the Islamic Index. This stock will be an exchange traded fund (ETF), a mutual fund that’s listed on an exchange and traded, the columnist said. Buying and selling of the ETF would be possible on the QE at any time during trading hours.

In the case of Al Rayan Index, by simply buying one stock, investors would get the advantage of 18 stocks (which the index tracks). This simplicity, flexibility and cost efficiency, wrote Khan, have helped ETFs surge to 2 trillion dollars worldwide.

Small investors, including expatriates, could particularly benefit from the listing of the ETF as huge investments and regular tracking and analysis as in the case of share portfolio management would not be required, say analysts.

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