MSCI and Qatar’s economic progression

by  — 5 August 2013

HSBC CEO Abdul Hakeem Mostafawi, says 2013 will go down in history as marking an era of change for a dynamic country that is constantly increasing its prominence in the global arena.

The half-year mark for 2013 in Qatar will be noted in history for some significant changes.  A new, young and powerful generation will be led by a leader who has already shown that he is capable and confident to tackle the issues of the day. HH the Emir Sheikh Tamim bin Hamad Al Thani was given the reins by HH the Father Emir Sheikh Hamad bin Khalifa Al Thani saying: “The time has come to open a new page in the journey of our nation that would have a new generation carry the responsibilities…with their innovative ideas.”

Preceding the announcement of a change in leadership in the country, Qatar was awarded a MSCI status as an Emerging Market. The new status came after a long and demanding process to introduce best practices and systems upgrades, educate investors and build confidence in the growth story. And the end result was a clear indication that investors have recognised the efforts and trust the sustainability of this process.  

In fact on June 12, a day after obtaining the Emerging Market status, the Qatar Exchange index was up by 163 points (1.75 percent) to close at 9517.95, which is the highest in the last four-and-a-half years. 

A day after obtaining the Emerging Market status, Qatar Exchange was up by 163 points, which is the highest in the last four-and-a-half years.

Taking effect in May 2014, asset managers are given sufficient time to rebalance their portfolios. Funds that were following a Frontier Market index as well as Emerging Market index will now have time for fund allocations. In addition, this will also give a chance for the listed companies who calculate the foreign ownership limits (FOL) based on the free float of shares to move to a market capital based calculation. An expectation of new listings and initial  public offerings (IPOs) is imminent with Barwa Bank, Doha Global Investment Company and four new Qatar Petroleum subsidiary companies going public. Encouraged by the government and QE, family-owned businesses might soon also appear on the listings. This could boost more cross-listings as neighbouring countries see an advantage in listing stocks in emerging markets to attract more investments.   

In the last MSCI review conducted in June 2012, MSCI had advised that the only impediment for Qatar in obtaining the emerging market status was the low FOL. To address this issue, various parties in the financial market are making extensive efforts to encourage listed companies to increase the maximum ownership percentage allocated for non-Qataris. 

The FOL is at a 25 percent of free float shares for most listed companies, while in some companies such as Ooredoo and Vodafone, it is at 100 percent. QE-listed companies are being encouraged to increase the number of their shares available to foreign investors to 25 percent of their total market capitalisation instead of the free float shares.  

According to QE, Doha Bank has recently changed its FOL to 25 percent of the market capitalisation, whereas the FOL of Masraf Al Rayan is set at 49 percent. Some of the other listed companies such as Commercial Bank of Qatar and Qatar Islamic Bank have also positively responded to this market request and may change the FOL shortly.

Qatar is charting economic and social progress and has formulated a clear vision and strategy about how to get there – Qatar National Vision 2030.  

It is certain that the vision is a reality and every step is one closer to reaching all the intentions of a country that wants to invest in its people so that all can participate fully in its economic, social and political life.

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