By Santhosh V Perumal/Business Reporter
Standard Chartered has said Qatar’s upgrade to ‘emerging’ market, effective from June this year, is important for the country but there was a need for more investment instruments, particularly local currency debts; where Doha can take the lead in the Gulf region in creating the market.
“The upgrade is important because global investors will be looking at Qatar, whose economy will grow fast and boom. It is stable economy as well,” StanChart Global Head Macro Research (Global Markets) Marios Maratheftis said.
Global index compiler MSCI had last year decided to upgrade Qatar and the UAE to ‘emerging’ market from the present ‘frontier’ status. The revision is effective from June this year.
There have been many reports that suggest Qatar could witness a robust inflow of foreign funds, especially exchange-traded funds, after its effective upgrade. Recently, al khaliji, one of the 42-listed companies, received shareholders’ approval to increase the foreign ownership limit to 49% from the existing 25%.
Referring to the upgrade, he said the key challenge for Qatar is to create more instruments for investments.
“I think it is necessary for the GCC (Gulf Cooperation Council) region and Qatar to create a debt market on local currency,” he said, adding the responsibility lies with the respective governments. However, he said every government in the GCC runs a surplus and to that the governments viewed there was no need to borrow.
In this regard, he said Singapore, which is also a surplus country, has actively developed its bond market and it borrows to create market than for funding. He also cited Egypt as an example.
One of the reasons why Egypt relatively survived its political instability is because it had a deep debt capital market in Egyptian pounds and Cairo was able to borrow in its own currency and “it is a huge luxury”, he said.
“It is an opportunity for the Qatar to take the lead in the GCC because no countries in the region have done that,” Maratheftis said.
Elaborating on investment instruments, he said there was a need for government bonds of various maturities and liquid instruments in own domestic currencies so that a meaningful yield curve could be arrived at.
Although there is a huge need to develop a corporate debt market, he said it is not happening in the Gulf region.
There is a talk of common currency in the GCC region, whose benefits are limited and instead what is needed was the combination of debt and equity markets in the region to create a bigger market for investors and it’s just the case of instruments and availability for investment opportunities.
