Interview: Rashid Al Mansoori
Given that MSCI and S&P have reclassified Qatar as an emerging market, what effect is this anticipated to have on capital inflows?
RASHID AL MANSOORI: The overall effect is that the reclassifications will bring in additional liquidity to the market and also put the market in the eyes of global investors. Since the announcement of the MSCI upgrade to emerging market status in May 2014, we have witnessed a positive impact.
S&P also announced that as of September 2014 Qatar would carry a 0.9% weight in the emerging markets BMI index. After the announcement by MSCI, the overall market value increased and a number of new accounts opened. For instance, in Q1 2014, the number of accounts opened equalled the total number of accounts opened in the entirety of 2013. We therefore are expecting a large inflow to the market, which is a positive movement for both local investors and listed companies’ liquidity.
People sometimes will complain that some shares are not traded at their true value, but with increasing amounts of capital, the share prices will rise.
As of today, international institutions represent approximately 65% of the market value. On the first day of the MSCI upgrade, we saw almost QR2bn ($548.2m) worth of inflow. MSCI did their own simulation and are expecting about $1.5bn to come into the market as a result of the upgrade.
How is the exchange working to increase listed companies’ foreign investment limits, which are often cited as a hindrance to development?
AL MANSOORI: Recently the emir passed a few changes regulating the foreign investment law. The first issue was whether foreign ownership was 25% of free float or of total capital, and the emir ordered that 25% of a company’s total capital can be foreign. The second major change was to treat all GCC citizens as Qatari citizens in terms of ownership, which frees up additional room for foreign investment. GCC citizens will no longer be included as foreign investors. In addition, a company can now increase its foreign ownership up to 49% without going to the cabinet for approval. So essentially, the instructions from the Emir are to increase foreign ownership within listed companies. Certain listed companies including Ooredoo or Vodafone already allow for 100% foreign ownership, but now companies who wish to open more than 25% to foreign ownership can do so by amending their articles of association, up to 49%. So, prior to the upgrade, some companies upgraded their foreign ownership limits such as Doha Bank and Commercial Bank. It wasn’t clear if the 25% was of total shares or of total capital, but now after this new law, everyone can clearly amend their foreign ownership limits if they wish to do so within a clear regulatory framework that stipulates the 25% is of total capital and does not include GCC citizens as foreign investors.
How will the introduction of exchange-traded funds (ETFs) help to further enhance overall liquidity in the markets?
AL MANSOORI: As the QSE, we need to be a multi-asset platform. We are diversifying to include equity ETFs, bonds and other products. In addition, we are also working with the regulator to introduce other tools for investors, such as liquidity provisions, margin trading and widening the use of security lending and borrowing. We have a number of ETFs we are working on, four in total. One of them is the Islamic ETF, QSE Al Rayan ETF, which is in its final stage. We are also working on an ETF for government bonds and are launching other ETFs on the Qatar Index.
Additionally, we are working with local banks to introduce additional products and give investors more choice. All of these new products will provide liquidity to the market as well as additional choice for investors. In addition to these, international asset management funds would like to invest in ETFs; therefore, we are giving them additional choice as well.
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