Qatar Exchange closes London leg of investor forums to coincide with inclusion of Qatar in MSCI Emerging Markets Index
Qatar Exchange (QE), in collaboration with QNB Financial Services and Bank of America Merrill Lynch, concluded a week roadshow that was held in London and New York to enhance investor relations between international investment institutions and Qatari listed companies.
The forum was designed to complement the companies’ ongoing investor relations activities through providing an opportunity for the senior management of listed companies to meet key decision makers from a number of the world’s largest international fund managers. However, the forthcoming inclusion of Qatar in the MSCI Emerging Market Index provided a unique opportunity for Qatar to showcase its market-leading listed companies at a time when the profile of Qatar was set to be raised further. The strength of the Qatar ‘story’ means portfolio investors continue to view Qatar as an exciting investment opportunity, a fact that has been reflected in the enthusiastic response to the forum.
Over 2 days of meetings in London through a combination of over 130 individual meetings, the listed companies met with over 64 fund managers representing forty major institutions. Those institutions represented the most important funds allocating money to Qatar, the GCC and the broader emerging markets. In aggregate the event hosted one hundred and forty meetings.
The delegation from Qatar was led by Rashid al Mansoori, CEO of Qatar Exchange, who delivered a speech about the achievements and future plans of Qatar Stock Exchange and why it would be a favorable investment destination for international fund managers and investment institutions. He said that: “we believe we have made significant progress at a legislative and technical level, infrastructure and systems, disclosure and governance practices, awareness-raising and spreading the culture of investment; as well as the diversification of investment tools and services provided to investors.”
Mr. Al-Mansoori highlighted that Qatar Stock Exchange has implemented a number of measures to enhance the liquidity of the market. He added that “these measures include tick size changes, adjusting the trading hours, enhancing the number of brokerage firms, assisting in licensing a number of banks as custodians, introducing the concept of liquidity provision and securities lending & borrowing. Secondly, we have introduced DvPand DMA schemes for foreign brokers, the latter through a sponsoring local broker. Thirdly, QE has introduced a number of new investment tools such as bonds and treasury bills, as well as launching various new indices.”
Mr. Al-Mansooroi went on saying that: “These infrastructure changes are of course market-wide and therefore benefits the international investor base too. Specifically with regard to attracting foreign investment, this is clearly an area of focus for Qatar Stock Exchange and our listed companies, demonstrated by our presence here today and the work we have done with MSCI in the past two years. To put this in context around 60% of the total turnover is generated by local investors. More than half of that is traded by individual investors; the rest by Qatari institutional investors. Therefore foreign investors generate around 40% of the total turnover, a percentage that has increased gradually since the opening of the market to foreign investors in 2005, but especially following the announcement of MSCI to include Qatar in the emerging market index by May 2014.”
Mr. Al-Mansoori added that foreign ownership rules are an important consideration for international investors. He explained that “there is currently a cap on the total holdings by foreign investors in each company, normally set by the Emiri Decree of 2005 at 25% of traded shares. However, companies may choose to have another percentage, depending on their own strategy and market demand, so long as that provision is included in their Articles of Association. A number of the companies present here today have made such a change to their Articles allowing for foreign holdings of 25% of the total share capital and others are already in this position. In addition a number of our leading companies (Ooredoo, Vodafone, Masraf Al Rayyan) have significantly higher percentages and/or no restriction at all. Qatar Exchange takes a pro-active role in working with our companies to make the necessary changes always balanced by the realities and practicalities of our market. In many instances, the cap is already sufficiently high and in only a few of them is the cap actually reached. It is not unusual in emerging markets for there to be such restrictions (either to temper capital flows or in Qatar’s case to ensure local investors are able to share adequately in the wealth distribution ethos of Qatar). ”
Mr. Al-Mansoori gave a presentation on the future plans of Qatar Stock Exchange saying that: “In the immediate future, the strategy will centre on continuing the groundwork laid in the cash market specifically (i) improving liquidity further (ii) facilitating listing procedures and developing investment products and (ii) improving disclosure and transparency applications.
Mr. Al-Mansoori clarified that Qatar Stock Exchange will therefore focus on the following two components.
(i) Capital formation:
• Significant new listings on the Main Market (QR 55 billion in 10 years)
• Developing the SME sector through a dedicated market (the ‘QE Venture Market’)
• Investigating an ‘on-exchange’ market for private companies (similar in concept to the recently announced NASDAQ model)
• Corporate bonds to complement the existing government and T-bill market
(ii) Capital allocation:
• Work on real free float (in part represented by securities lending and borrowing)
• Target development of portfolio management (agents) and advisory services
• Diversify from long-only model (represented by covered short selling and derivatives)
• Product development (including REITS, ETFs and in the longer term warrants)
Mr. Al-Mansoori stated that Qatar Stock Exchange is keen to implement the world best practices in securities trading, clarifying that: “As we speak we continue to work with the regulator to introduce margin trading and covered short selling regulation. The liquidity aspect is our top priority given its importance to the domestic and international investor base. In this sense, the development of QSE’s trading environment (now covering UTP, DvP and Scila) reflects best international practice providing investors with new investment opportunities backed by the existence of efficient and effective systems.”
“Qatar Stock Exchange is working on two live ETF projects. One of these will be an ETF based on government fixed income risk from an Asian borrower and the second product is likely to be an ETF based on a representative Qatar-country index. We hope to introduce these ETFs to the market in the next 6 months. In terms of AUM these transactions will be larger (by an order of magnitude) than anything else currently listed in the region,” Mr. Al-Mansoori concluded.
Thirteen listed corporates, representing blue-chip investment opportunities in the Qatari market, used the London-New York forms to meet with the world’s leading fund managers. The Qatari companies participating were: Qatar National Bank, Doha Bank, United Development Company, Ooredoo, Industries Qatar, Mesaieed Petrochemical Company, Gulf International Services, Vodafone, Qatar Islamic Bank, Commercial Bank Qatar, Al Khaliji Commercial Bank, Qatar Electricity & Water and Milaha.
Translator and Interpreter