Fund managers bullish on Qatari market

01/08/2016 06:07 AST

The Qatar Exchange (QE) benchmark index slipped yesterday, but posted its second consecutive month of gain with the index rising 7.27 percent, or 718.74 points, on month-on-month. The benchmark index edged 0.45 percent lower yesterday to cap the month at 10,603.96.

The monthly surge was mainly driven by blue chips. Real estate, telecoms and banking stocks were among the best performing in July. Real estate sector surged 8.52 percent with Ezdan climbing the most by 9.65 percent. Barwa gained 7.58 percent.

Driven by Ooredoo, telecoms added 7.94 percent. Ooredoo jumped 7.47 percent in July. QIB and QNB lifted banking sector 7.10 percent.

A Reuters poll found Middle East fund managers have become more bullish towards equities in the region over the past month because of flows of money into emerging markets. The poll of 14 leading fund managers, conducted over the past week, found 43 percent expect to raise their allocations to Middle Eastern equities in the next three months and 14 percent to reduce them. But they are wary of the direction of oil prices.

This is the most bullish balance for equities since February. In the previous month’s poll, 7 percent anticipated raising equity allocations and 7 percent reducing them. Sentiment has also improved towards Qatar, where 36 percent expect to increase equity allocations and 14 per cent to reduce them, compared to 14 percent each a month ago.

Akber Khan, director of asset management at Al Rayan Investment in Doha, told Reuters that Qatar could get a boost when it is promoted this September to the status of a secondary emerging market from a frontier market by index compiler FTSE.

The LSE-listed Qatar Investment Fund (QIF) said in its Q2 investment report that it remains overweight in the Qatar banking sector, including financial services, at 43.3 percent of net asset value (NAV) compared to QE weighting of 38.1 percent. QNB remains QIF’s largest holding (18.4 percent of NAV). Industrials remain the second largest exposure at 26.8 percent against 27.6 percent in Q1, mainly in Industries Qatar.

QIF re-entered the services and consumer goods sector with an exposure of 1.8 percent of NAV. Exposure to the telecom sector increased from 6.1 percent in Q1, 16 to 6.9 percent in Q2. QIF’s Investment adviser expects that the Qatari market will perform well over the medium to long term, driven by strong macroeconomic fundamentals. The near term catalyst for the market would be its inclusion in the FTSE Russel Secondary Emerging Market Index in September 2016, attracting additional inflows.

On account of Brexit, GCC equities might be impacted in the short term, in line with the global trends, as risk aversion overcomes investor sentiments. However, QIF’s Investment adviser believes that the impact of Brexit would be minimal on the GCC equities as their earnings prospects are little affected by the event. Thus the equities are expected to recover gradually as their movements are fundamentally linked to domestic factors and oil prices.

The Peninsula