Due to efforts to punish abusers and bolster investor confidence, there has recently been greater confidence surrounding Qatar's Doha Securities Market (DSM).
A number of private Qatari investors were recently sentenced to three-month suspended terms for using the names of dead relatives to subscribe to shares in the initial public offering (IPO) of the Qatar Gas Transport Company, known as Nakilat. Out of the 83 Qatari nationals charged, one was found not guilty and the remaining 82 were convicted.
The Misdemeanour Court, which heard the trial, said that the IPO subscription forms constituted a legal document and considered tampering with them punishable by law. The suspended sentences will run for three years, meaning that should any of the investors re-offend within this period they will automatically be made to serve their prison sentence.
Formed in June 2004, Nakilat aims to be the largest transporter of liquid natural gas (LNG) in the world by 2010. The company floated on the DSM in early 2005 in a very successful IPO - around nine times oversubscribed. The flotation was said to have seen applications from almost every Qatari citizen.
"While 50% of the shares in Nakilat are owned by Qatar Petroleum, Qatar Navigation, Qatar Shipping and other state entities, the remaining 50% of the company's shares were floated on the public market expressly for private investors," Muhammad Ghannam, managing director of Nakilat, told OBG. "The intention was to allow Qataris to share in the profits of the country's resources and to feed the wealth of the energy sector back into the general population."
At the time of the listing only Qatari nationals were allowed to subscribe to IPOs on the DSM. The primary market has since been opened up to Gulf Cooperation Council (GCC) nationals, with non-Qatari investors allowed to trade in the secondary market.
The sentencing of the investors in the Nakilat controversy comes at a time when the DSM is attempting to increase investor confidence through greater transparency.
Meanwhile, stock markets across the region saw huge gains over the last year and IPOs were extremely popular. In 2005, alongside Nakilat, the DSM saw two other successful listings - the $40 million issue for Dalala, which was eight times oversubscribed, and the $293m IPO of Barwa, which came in four times oversubscribed.
A large number of private investors became extremely wealthy through their stock market investments. The World Wealth Report 2005, produced by Merrill Lynch and Capgemini, showed the number of high net worth (HNW) individuals in the Middle East increased by 9.5% over 2004, while their individual wealth increased by 28.9%, the largest increase anywhere in the world.
However, the stock market "correction" that later swept the region stung a large number of private investors and sent stock prices tumbling. Even the long awaited $1.1bn listing of al-Rayyan Bank on the DSM in June, which saw investor interest from all over the GCC, failed to have any significant impact on the stock market. The bank listed at QR18 a share and almost immediately the price fell to under QR15.
Since then, however, the bank's share price has risen, alongside that of Nakilat and Industries Qatar, which had previously been the major market movers until the listing of the enormous number of shares in al-Rayyan Bank.
The rise is attributed to the introduction of a buyback ruling which, long talked about, came into force on July 6 and allows listed companies to buy back up to 10% of their own shares. The ruling is thought to have bolstered flagging investor confidence and helped to stabilise the market.
Analysts are now predicting that institutional investors who apply long-term strategies will dominate the weakened GCC bourses.