From 'frontier' to 'emerging market' status

What role will the Middle East play in shaping future investment trends?

Notwithstanding current regional geopolitical tensions and their effect on the risk appetite and confidence of the investment community, the Middle East, and the Gulf Cooperation Council (GCC) countries in particular, will continue to grow in importance as both investors and as investment destinations. The upgrade of Qatar and the UAE to emerging market status by both MSCI and S&P, and the proposed changes to investment laws in Saudi Arabia, have led to a surge of interest in the Gulf economies. These countries, and others in the GCC continue to generate significant wealth, for both states and individuals, the majority of which will continue to be channeled towards investment, whether locally, regionally or internationally. If and when political tensions ease in the Middle East, those countries with large, young and well educated populations and with significant natural resources will increasingly impact investment trends, both regionally and globally.

What role does the Qatar Exchange play in promoting the country’s econo-mic development?

We provide information on our leading companies and giving investors the opportunity to benefit from their continued growth. We are in constant contact with privately held and family companies, as well as government-owned entities, advising them of the advantages of being listed on the exchange, and encouraging them to be part of our community.

We are very active in supporting investor relations initiatives and events, and spend considerable time and resources to provide education to the local investor community. We host, contribute to and sponsor both domestic and international events to promote Qatar as an investment destination.

The Qatar Exchange is currently home to nearly 43 companies. How do they reflect the country’s economic diversity?

Our issuers and the sectors in which they are classified are representative of the economy as a whole, although we do recognize that some of largest companies in Qatar are not currently listed. The sectors are banks and financial services, insurance, industrials, real estate, telecommunications, and consumer goods and services, and in the majority of these sectors there are companies with globally recognizable brands with excellent reputations. As the exchange continues to expand its issuer base, more and more leading Qatari companies, with international exposure, will further demonstrate the strength, diversity and excellence of our nation.

Many economists have conflicting views on the benefits and challenges of Foreign Direct Investment (FDI). Some emphasise the “crowding out” effect, whereas others underline FDI’s central role in promoting economic growth and international integration. What role do you think FDI has played, and/or could play in Qatar’s future?

There is no doubt that FDI has played an important part in the development of Qatari industry, with numerous partnerships being formed to exploit our abundant natural resources. These developments have helped to elevate Qatar to a position of influence both politically and economically. FDI has also contributed to the development of our human capital, through knowledge transfer and education. Continuing large scale development of our nation’s infrastructure and industry would clearly benefit from further FDI, where international companies can share in the benefits of preparing for the hosting of the World Cup in 2022 and the realization of the Vision 2030 objectives.

How do you perceive the effect of this upgrade on the Qatari markets and the overall GCC economy?

There is no doubt that the upgrade has had a very positive effect on both the visibility of Qatar and the GCC as investment destinations and the performance of our exchange. Liquidity has improved considerably and our investors have enjoyed strong gains in the value of their portfolio holdings. From an economic standpoint, the profiles of countries and markets and the issuers on our markets have all been raised considerably, which will benefit all of our economies going forward.

Tell us about the transformation of the Doha Securities Market into the Qatar Exchange. Five years on, how it has achieved such a strong regional position?

The Doha Securities Market (DSM) was established in 1997. Since that time, DSM has been through numerous and significant changes.

A central registry was introduced in 1998 and in 2001 manual trading systems were replaced by electronic systems. In 2005 the market opened up for foreign investment and the DSM transformed from a fully self-regulated organization into a partially self-regulated organization overseen by a new regulator, the Qatar Financial Markets Authority. At the same time the DSM name was changed to Qatar Exchange, to better reflect its national identity. (The year) 2010 saw the introduction by Qatar Exchange of a state-of-the-art trading platform, UTP, which was originally developed by and for NYSE Euronext.

The present Qatar Stock Exchange is part of a national vision aimed at establishing Qatar as a world-class, internationally recognized market. The recent announcement by the government to allow for an increase in foreign ownership limits from 25% to 49% is a testament to that commitment. Qatar has benefitted from the upgrade, from frontier to emerging market in the MSCI classification system, which has led to an inflow of foreign capital, evidenced by a significant increase in trading volumes.

Qatar Exchange has ambitious and aggressive plans to introduce new products and technologies to meet the demands of both the domestic and increasingly international investor community.

Tell us about the QE Qatar Venture Market programme, which allows small and medium-sized enterprises (SME’s) to raise capital more easily by listing on the exchange. What are the benefits for the companies and for investors?

The QE Venture market was introduced to create a platform for capital-raising for the benefit of SME’s which would benefit from a customized regulatory framework. SME’s that are planning to come to market will not only benefit from an increase in capital. Being listed is a transformational process that will see SME’s engage with investors, explain their growth story and increase their overall visibility, benefits that go far beyond access to capital alone. For investors, having these SMEs come to the market will mean that they will have a greater range of investment choices, each with their own risk/reward profiles.

What are the challenges you face as an institution in the medium term, in light of the increasing competition from other markets in this era of globalization?

Although there are obvious challenges for any business that is opening up to competition, one should bear in mind that the Qatari stock market is in the fortunate position of having a very strong local investor base, both institutional and retail. This combination of a strong local investor base and increasing foreign capital inflows puts us in the right position for the future. Together with the high level of commitment that we have to develop our market, I strongly believe that globalization will be more of an opportunity than a threat.

How accessible is your market, and how are you working to facilitate the growth of capital markets and attract Foreign Direct Investment by increasing investor confidence?

We believe that our markets are already accessible, to a large extent. Any foreign investor can open an account with our settlement organization, the QCSD, and we have a number of very good local custodians able to provide a wide range of services any sophisticated international institutional investor may require. As I mentioned before, we will continue to see a gradual increase in the levels of foreign ownership of Qatari listed companies, and at the same time we will continue to work tirelessly to reform the market and develop products and services that meet the needs of the investor community.

Why do you think Qatar has had this flourishing attraction to inves-tments in the UK?

Clearly, there are strong histor-ical ties between Qatar and the UK and Qataris by and large have considerable affection for all things British. One of our destinations of choice continues to be London. We also recognize and respect the openness of the UK as an investment destination and the strong and globally respected legal and regulatory framework which protects the rights of individual investors, regardless of their origin. The UK is seen as a successful, vibrant and resilient economy, all attractive attributes when considering avenues for investment.