Skip to content Skip to Search
Skip navigation

Sustained sell-off makes Qatari stocks more attractive

People celebrate after Eid al-Adha morning prayers inside Education City Stadium, Doha. The completion of infrastructure projects leading up to the 2022 World Cup meant there were few opportunities and catalysts left for the market IMAGO/Naushad via Reuters Connect
People celebrate after Eid al-Adha morning prayers inside Education City Stadium, Doha. The completion of infrastructure projects leading up to the 2022 World Cup meant there were few opportunities and catalysts left for the market
  • Bourse slump followed World Cup
  • Gas price fall dents confidence
  • Economic outlook remains bullish

Qatari stocks are among the Gulf’s most attractively priced, according to core metrics, after a sustained slump on Doha’s bourse.

The decline – the Qatari index is down about 27 percent from its late 2021 peak – comes after a momentous rally that propelled the index to a seven-year high when investors bet on a corporate earnings windfall from the country’s hosting of the 2022 World Cup.

“The completion of large-scale infrastructure projects leading up to [the tournament] meant there were few opportunities and catalysts left for the market after that,” said Shakeel Sarwar, head of asset management at Bahrain’s SICO investment bank.



Raghu Mandagolathur, CEO of Kuwait’s Marmore Mena Intelligence, said a steep drop in the price of gas, Qatar’s chief source of earnings, had dented investor confidence, along with regional geopolitical uncertainties.

The state-owned QatarEnergy made a net profit of QAR101.9 billion ($28.0 billion) in 2023, down 31 percent versus 2022 as revenue from crude oil, natural gas and fertilisers all fell.

The reduced profit restricted government participation in the market, Mandagolathur said. Last year, 44.6 billion shares changed hands on Qatar’s bourse, down from 55.2 billion in 2021.

This year, domestic retail and institutional investors have been net buyers of Qatari stocks, while foreign investors are net sellers, he said.

Valuations  

Qatar’s bourse was trading at a price-to-earnings (P/E) ratio of 12.2 as of June 25. Saudi Arabia’s is 21.3, Marmore estimates, while Abu Dhabi's stock exchange has a P/E ratio of 16.2, Dubai of 8.2 and Kuwait of 15.0.

Qatar’s bank and financial sector has a PE ratio of 9.3 down from 13.5 on October 1, 2022, the earliest available official bourse data.

About 20 percent of Qatari banks’ lending is to the real estate sector, which is a big source of loan defaults, Mandagolathur said. That has led to a deterioration in asset quality, he said, with shrinking margins because of Qatari banks’ operations in high-inflation countries such as Turkey and Egypt.

In terms of dividend yield, Qatari stocks have become more attractively priced for investors. The overall bourse dividend yield was 4.7 percent as of June 25, up from 3.5 percent on October 1, 2022.

That compares favourably with Saudi Arabia (3.3 percent), Abu Dhabi (2.1 percent) and Kuwait (3.7 percent) and, in the Gulf, is only below Dubai’s 6.0 percent, Marmore estimates.

Foreign ownership

After Qatar’s inclusion in the MSCI Emerging Markets Index in 2014, many state-controlled listed companies increased foreign ownership limits to 100 percent.

That helped raise Qatar’s MSCI index weighting to 0.9 percent from 0.6 percent, attracting sizeable inflows from passive funds that track the benchmark, despite the proportion of shares really available to foreign investors remaining unchanged.

For example, the number of shares of Qatar National Bank and Industries Qatar that can be owned by foreigners are double the companies’ respective free floats. Likewise, Qatar Islamic Bank, Commercial Bank of Qatar and Doha Bank each have foreign ownership limits above the number of free-float shares. All are partly government-owned.

Gas

Although Qatar’s bourse is downbeat, its economic outlook is bullish. The country will nearly double its liquefied natural gas capacity to 142 million tonnes a year in 2030. Such an increase would enable Qatar to overtake the United States and Australia and become the world’s top LNG exporter.

Sarwar said: “The impact on local listed companies is going to be limited in the short to medium term as local banks were not interested in project financing given extremely thin margins.”

In the longer term, the benefits to listed companies will depend on how the government spends the proceeds from increased gas exports, he said.

“Unlike the previous phase, much of the country has been developed and hence the spending needs are much less,” Sarwar said. If the money was invested internationally, "the impact will be limited to companies directly linked to the gas project, such as Nakilat and Qatar Navigation.”

Latest articles

Part of the $3 billion deal is to redevelop Indonesia's Soekarno-Hatta International Airport

Eagle Hills gets claws into Indonesia

Eagle Hills, the Abu Dhabi developer, looks set to add Indonesia to its burgeoning worldwide portfolio. A tentative agreement was signed on Wednesday with the Indonesian government to develop $3 billion worth of tourism assets in the Southeast Asian archipelago. The deal has a validity of one year only, with the possibility of renewal, and […]

In a concession to the electorate, the legislation before parliament proposes a 25 percent increase in the payment to pensioners on the lowest rate of support

Turkey targets business with steep taxes to raise revenue

Multinational corporations operating in Turkey face a steep increase in their tax bills, thanks to one of the new revenue-raising measures outlined by the government in draft legislation aimed at narrowing the budget deficit. Under the new tax reforms, tabled before the parliament on July 16, multinationals with more than $817.6 million in annual consolidated […]

Saudi growth forecast

IMF lowers Saudi growth forecast over oil output cuts

The International Monetary Fund has lowered its forecast for economic growth in Saudi Arabia by almost an entire percentage point, as cuts in oil production continue to weigh heavily on the kingdom’s economy.  In its World Economic Outlook Update, the IMF reduced its forecast for Saudi GDP growth to 1.7 percent for this year, down […]

People, Person, Groupshot APQ CEO Ebubekir Koyuncu (sitting left) and Aramco acting senior vice president of new business development Mohanad M Alamdar at the signing ceremony

Saudi Aramco bolsters blue hydrogen portfolio 

Saudi Aramco has acquired a 50 percent stake in Jubail-based Blue Hydrogen Industrial Gases Company (BHIG), a wholly-owned subsidiary of Air Products Qudra. No financial details were disclosed. The transaction, subject to standard closing conditions, includes options for the oil giant to offtake hydrogen and nitrogen.  The remaining 50 percent will be owned by APQ, […]