Mohamed Jassem, a small investor, bought 1,000 Qatar National Bank (QNB) shares for QR 172,000 early in January of 2014. When the year came to a close he was happy to see that he had made a return of QR 41,000 on the stocks as they rose 23.78 percent in value to QR 212.90.
A jubilant Jassem offloaded 500 of the QNB stocks and retained the remaining 500 in the hope of making at least QR 20,000 more profit in 2015, aside from getting good dividend income. But as 2015 ended, the stocks fell by almost 18 percent to QR 175, so instead of making a profit of QR20,000, Jassem lost almost an equal sum – QR19,000.
QNB’s are not the only shares Jassem holds as he manages a fairly average size of portfolio and may now seek professional help in portfolio management.
He and many other investors have eagerly been looking forward to a safer route to stock investment, which is through mutual funds. But that is almost non-existent in Qatar as the number of listed shares on the local equity market (Qatar Stock Exchange popularly known as Qatar Exchange) remains 43 – too small a number for mutual fund providers to enter the market in some big way.
For Ahmed Salem*, another small investor on the Qatari bourse, 2014 literally proved to be a year of financial windfall. He bought 2,000 Islamic Holding shares on the advice of a friend for QR 92,000 in January, 2014 at the rate of QR 46 per share, and when the year was ending his joy knew no bounds as the stocks had grown 171 percent in value to QR 248,000. He had made a killing of QR 156,000 in just a matter of a year.
Qatar levies no capital gains tax even if one sells the shares the same day one buys or a month, a year or two after the purchase. And this no-capital gains tax policy is for locals as well as foreigners. The idea, obviously, is to woo more foreign investment into its securities market which remains small.
Salem was lucky in 2014 when the local stock market surged by an impressive 18.36 percent. The main benchmark index of Qatar Exchange gained over 1,906 points to close at 12,286 in the year. The market capitalisation, or investors’ wealth, was at its peak – a little over QR 676.79 billion. The stocks grew in 2014 impressively enough, although oil prices in the global markets had begun sliding in June that year itself.
Jassem, Salem and tens of thousands of other small investors like them, corporate and institutional investors included, weren’t lucky in 2015 which has just ended. Qatari equities fell 15.11 percent in the year.
Some analysts attribute the fall to the continuous crude price decline over 18 months in the international market. The decline on Qatar Exchange has been despite the fact that company earnings for the first nine months of 2015 have been robust. Full-year net profits should be known by this month, but at least 7 percent growth in collective net profits of the listed entities is expected.
The main benchmark index of Qatar Exchange fell by 1,856.42 points in 2015 to 10,429.36. Market capitalisation stood at QR 553.17 billion as on 31 December, 2015, the last day of trading in the year.
Interestingly, in two years since early January 2014, investors on the QE have become poorer by QR 123.82 billion. In other words, investors’ wealth or the market cap has declined by QR 123.82 billion in the past 24 months. The market cap of QE, as on 1 January, 2014 was a little over QR 676.79 billion, sliding to QR 553.17 billion on the last day of trading 24 months later, on 31 December, 2015.
It is interesting to note that in less than a week since the year 2015 ended, the market cap of Qatar Exchange has fallen by QR 18.18 billion, to QR 534.99 billion, on 6 January, 2016, from QR 553.17 billion as on 31 December, 2015.
The stocks that have taken the maximum beating in 2015 include Islamic Holding (down 36.79 percent to QR 78.70 from QR 124.5 earlier in the year), and Dalala (stock brokerage firm which lost as much as 56.8 percent with its shares closing at QR 18.49 from QR 42.8 early in 2015).
The other shares that lost included Ooredoo (down 39.47 percent), Vodafone Qatar (lost 22.8 percent), Mazaya Qatar (down 25.85 percent), UDC (down 12.04 percent), and Gulf Insurance (down almost 40 percent).
Still other major losers were Doha Insurance (down 27.59 percent), Messaieed Petrochemicals Holding Company whose shares were down 34.24 percent to QR 19.40, Gulf International whose stocks lost almost 47 percent, Industries Qatar (IQ) which was down 33.87 percent, National Cement (down 22.73 percent), local petroleum products distributor and record dividend paymaster Woqod (Qatar Fuel) whose stocks shed 27.8 percent value. Qatar Cinema and Qatar-German Medical Devices Company were losers, too.
The year was so bad for Qatari equities that of the 43 listed stocks, 36 fell. Stock analyst, Afa Boran, who is head of asset management at Amwal, told local media in remarks in January 2016 that a 15 percent decline of Qatari stocks was not a cause of worry as it was broadly in line with other GCC markets.
However, another analyst tells BQ since oil prices are not expected to improve significantly this year, Qatari equities could remain subdued in 2016 also. He, though, adds he is upbeat about the long-term prospects of Qatari stocks.