Qatar, Abu Dhabi markets offer attractive opportunities

By R Seetharaman/Doha

Global markets witnessed correction this week as there was outrage in Cyprus over the unprecedented levy on bank deposits. Last weekend, eurozone finance ministers had agreed a €10bn bailout package for Cyprus to save the country from bankruptcy. In return, Cyprus was being asked to trim its deficit, shrink its banking sector and increase taxes. Cyprus’ banks were badly exposed to Greece, which has itself been the recipient of two huge bailouts.

Contagion fears will spread through investors on account of revival of euro crisis.

The GCC (Gulf Co-operation Council) markets also witnessed correction on account of concerns of resurgence of euro crisis. Dubai and Abu Dhabi had led the rally this year in GCC with year-to-date (YTD) growth of more than 15%. The UAE markets performed well because of good results recorded by most banks and property firms.

Kuwait market has shown an YTD growth of more than 13% on optimism over increased state spending and largely upbeat earnings. Muscat and Bahrain indices have gone up YTD by more than 5% .Oman market continued to go up with financial services and industrial sector contributing to the rally. Saudi market had gone up by more than 3% YTD.

Till end of last week the capitalisation of Dubai exchange was $57.06bn, Abu Dhabi exchange $89.73bn, Saudi Arabia exchange $382.6bn, Kuwait exchange $105.63bn, Oman exchange $21.65bn and Bahrain exchange $20bn.

Until March 17, the Qatar Index advanced 2.6% YTD. The Industrials index has gained YTD 9.8%. The industries segment had gone up on account of good dividend expectations and Mannai Corporation gained from improved results on account of acquisition of Damas Jewellery. The transport sector was up by 9.7% YTD.

Nakilat was the major gainer on account of consecutive fourth year of increase in dividends despite a flat operating performance.

The telecom sector was up 8.7% YTD. Vodafone Qatar improved its operating performance for year 2012 and contributed to the surge. Qatar telecom has rebranded itself as Ooredoo and planning to enter new markets which has given a boost to its share price .The consumer and services sector was up by 9.5% YTD.

The banking sector was up by 4.2% YTD. QNB surged on account of progress in overseas expansion. The realty sector fell by 4.36% YTD. Barwa’s annual profit dropped, resulting in a fall in its share price.

The insurance sector fell by 0.13% YTD. Qatar Insurance had gone down on account of capital increase plans, apart from dividend and bonus issues. Qatar General Insurance had also gone down after dividend and bonus issue announcements.

Qatari companies are better-placed in a relative landscape of diversification of revenues, strong corporate governance, sound balance sheet, attractive P/E and P/B ratios and comparatively higher dividend yields in the GCC region. Qatar is the second largest market in the GCC regions with market capitalisation of $128.9bn till the end of last week.

The Qatar Exchange brought in new equity indices in April 2012 and also encouraged Treasury bill trading since January 2012. Qatari companies are expanding its footprints outside given the valuable opportunities in the current global scenario. The Qatari index trades at 8.63x on FY13 earnings, which is attractive against all other GCC indices except Abu Dhabi’s. The current price to earnings of Abu Dhabi looks attractive which is at 9.31X. Qatar and Abu Dhabi offers attractive opportunities for investors.

Qatar will create a new $12bn investment firm, backed by bluechip assets from its sovereign wealth fund, and list it on the local bourse. Qatar Holding will transfer $3bn worth of assets into the new firm, with a similar amount raised in an initial public offering (IPO) on the QE.

A further $6bn will be raised at a later date. This IPO will not only enable Qatar to diversify its assets but also enable investors to participate in the global diversification. This IPO will also encourage investors to shift money from stocks which offer low dividend yields.

SR Seetharaman is Doha Bank’s Group CEO. Any opinions expressed are his own.