First with Financial Comment from Arabia

Part US-owned Qatar Exchange goes online for foreigners, stocks cheap as GDP surges

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Several local brokers on the Qatar Exchange in Doha are offering online brokerage accounts that are open to foreigners whether they live in Qatar or not. HSBC can also buy stocks for foreign clients and act as local custodian.

There are limits on foreign holdings in Qatari companies of up to 25 per cent but for most stocks foreigners do not hold more than 10 per cent so there is room for foreigners to buy more. All that is required is for foreign buyers to open a brokerage account in person and fund it. Then they can trade on the Qatar Exchange or buy and hold these stocks.

Buying into Qatar’s success

The reason to take an interest in the Qatar Exchange is simple enough. Next year new Liquefied Natural Gas train facilities are coming on stream in Qatar and the national GDP is set to surge by 24.5 per cent according to the Economist Intelligence Unit. The Qatar Government is forecasting a more modest 16 per cent.

The local stock market has powered back 65 per cent from its low in February, but took a big knock with the global financial crash last autumn. But ask yourself which is a better buy: the S&P 500 in the US after a 65 per cent price surge and two or three per cent GDP growth forecast for 2010; or Qatar Exchange with a similar price movement and perhaps ten times the GDP growth in prospect for next year?

In June the NYSE Euronext paid $200 million for a 20 per cent stake in Qatar Exchange after winning an open competition among global bourses for ideas to develop the stock market.

NYSE Euronext will institute a period of internal reform, tightening reporting and governance standards. And the percentage of stock available to foreign ownership will be gradually increased. One bank already offers up to 49 per cent while the biggest local property developer UDC has applied for the same increase.

Government support

The Qatar Government is strongly supportive of its local market and intervened heavily to lessen the impact of the global financial crisis last autumn, particularly on the local banks. Its oil and gas revenues give it an extraordinary ability to intervene, but the stock market is a part of a well-considered plan for economic diversification and globalization to lessen dependence on hydrocarbons.

Aside from the banks the Qatar Exchange has the local Qtel, Qships and Qatar Industries as good plays on the GDP growth story. Doubtless Qatar Exchange would take a hit if global stocks correct from their recent rally but would then be a screaming buy. A repeat of the 2005 Gulf stock market boom looks inevitable unless the global economy turns sour.


Written by Peter Cooper

November 18, 2009 at 7:54 am

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