Robust regulatory framework supports capital market activity in Qatar


Qatari capital markets continue to play a major role in the national economy despite a gradual slowdown brought about by the slowing pace of infrastructure investment in the run-up to the 2022 FIFA World Cup. Nonetheless, the Qatar Stock Exchange (QSE) enjoyed a strong year in 2019, following on from the previous year, in which it was the best-performing market in the GCC, with returns of around 20%. On a macroeconomic level, the IMF forecast real GDP growth of 3.1% for Qatar in 2019, driven by the recovery of oil and gas production, robust non-hydrocarbons growth and prudent fiscal management. Capital markets look set to rally once more in 2020, with a reformed and strengthened regulatory framework underpinning robust financial institutions.


Qatar has one stock exchange – the QSE – on which all assets are traded in local currency, and the Qatar Central Securities Depository (QCSD), which is responsible for handling deposits, settlements and transaction clearing. Originally a department of the QSE, the QCSD became independent in 2014 and is now owned in its entirety by the Qatar Central Bank (QCB).

As of March 2020 the QCSD had nine brokers and three sub-custodians. Meanwhile, the QSE had a total of 47 listed companies, with 13 in the banking and financial services sector, 10 in industry, 10 in consumer goods, five in insurance, four in real estate, three in transport and two in the telecommunications sector. In a notable development, one of these firms – the dairy products company Baladna – joined the exchange via the launch of an initial public offering (IPO) in October 2019. The country is also home to four Islamic banks, and has experienced a slew of banking mergers following the 2014 drop in international oil prices.

With the 2022 FIFA World Cup approaching and work on a number of infrastructure projects under way, small and medium-sized enterprises (SMEs) account for an increasing share of lending portfolios. This trend is expected to continue, in line with the spending commitments planned as part of Qatar National Vision 2030. Indeed, under the country’s national development strategy, nearly QR60bn ($16.5bn) in infrastructure and real estate projects are envisioned between 2020 and 2022, in an effort to help offset falling private sector investment and support economic diversification.


Following on from its 2018 performance, the QSE witnessed strong returns in the consumer goods, telecoms, industry and transport sectors throughout FY 2019. The QSE was elevated to emerging market status in 2014 by leading capital markets indexing company MSCI. However, trading volumes have fallen since the upgrade, averaging QR11.4bn ($3.1bn) in 2019, according to the QCB. Meanwhile, the market capitalisation of the QSE fell slightly from QR588.7bn ($161.6bn) in 2018 to QR582.7bn ($160bn) in 2019. Nevertheless, three Qatari companies were added to the MSCI Emerging Market Index in May 2019, namely Mesaieed Petrochemical Holding Company, Qatar Fuel and Qatar Aluminium Manufacturing Company.

As with any exchange, the QSE is vulnerable to international pressures and fluctuations in geopolitical stability. The impending 2020 elections in the US and ongoing US-China trade war have all been mooted as possible concerns, as has the ongoing economic boycott imposed on the country by Saudi Arabia, the UAE, Bahrain and Egypt since 2017.

Stock market performance also depends on many political and consumption factors, and analysts at the QSE have been assessing potential currency shocks related to the UK’s withdrawal from the EU. Overall, however, the index’s performance was strong in 2019, and the one of the focuses for 2020 is a shift towards the environmental, social and governance (ESG) segment. In 2018 the QSE launched an online ESG platform, making Qatar one of the first countries in the world to promote transparency and disclosure by digitalising ESG data.

Furthermore, Qatar’s domestic securities portfolio expanded by more than 12% to QR178.1bn ($48.9bn) between December 2018 and December 2019; with debt growing by around 9%, sukuk (Islamic bonds) by more than 16% and equity by 41%. During this period debt was largely accrued by the government, whose total holdings of debt rose more than by 14% to QR94.1bn ($25.8bn). In a significant development that bodes well for the future stability of the sector and the economy at large, the country’s long-term issuer outlook was raised from negative to stable by international ratings agencies Fitch, Moody’s and Standard & Poor’s during 2018. This was attributed to Qatar’s perceived ability to withstand financial and economic headwinds while also pursuing prudent macroeconomic policies.

An important contributor to the overall performance of the QSE was increased activity in the banking sector. Banks and financial institutions make up the greatest share of listings on the QSE, meaning their exerts a considerable influence over the movement of the exchange (see Banking chapter). The commercial banking segment’s asset base grew by 9% between December 2018 and December 2019 to QR1.55trn ($425.4bn), with domestic assets constituting 85% of the total. Total credit in the commercial banking segment was up 11% to QR1.04trn ($285.4bn). Meanwhile, private sector credit registered a more than 20% expansion to QR635.2bn ($174.3bn); while public sector credit experienced a small 0.37% decline to QR17.5bn ($4.8bn). Furthermore, non-resident deposits at Qatari banks continued their recovery during the first six months of 2019, growing by 17.3%.

Stock Split

Between June 9 and July 7, 2019 a 10:1 stock split was phased in for companies listed on the QSE, with the nominal value of each share in all listed companies repriced at QR1 ($0.27). The change put the face value of stocks on a par with that of other markets in the region, giving investors a better sense of pricing. While the primary motivation was to increase liquidity on the exchange, sector players have noted that the stock split was also designed to encourage more small and individual investor activity, expand the shareholder base and encourage institutional participation.

International Investment

Qatar has made a concerted effort to attract capital from new international sources since the economic blockade began in 2017. Currently, foreign investors hold around 11% of the shares listed on the exchange but make up about 30-40% of daily turnover. In June 2018 the QSE increased the foreign ownership limit from 25% to 49%. This followed the government’s approval, in May 2018, of a draft law enabling non-Qatari investors to own 100% of capital in all economic sectors, opening a range of new investment opportunities in the economy, notably in real estate. Since 2018 the QCSD has updated foreign ownership levels for Qatar Petroleum, Industries Qatar, Gulf International Services, Mesaieed Petrochemical Holding Company, Qatar Electricity and Water Company, Qatar Islamic Bank, Barw Bank, Woqod, Qatar National Bank (QNB) and Qatari Investors Group. In May 2019 six more companies announced that they would allow up to 49% foreign ownership, attracting more liquidity and creating greater space for foreign investment. In another effort to stimulate investment, the QSE launched two exchange-traded funds (ETFs) in 2018 – one tracking the overall exchange and one for local sharia-compliant stocks – and is currently developing two new ETFs – one focused on gold and another for sharia-compliant assets outside of Qatar. These are expected to be launched in 2020.

Furthermore, the country achieved one of the most substantial improvements in its World Bank’s “Doing Business 2020” report ranking, rising six places to 77th out of 190 economies. According to the World Bank, increased investor confidence has been buoyed by the country’s ambitious programme of business regulation reform and a sovereign wealth fund with assets valued at over $300bn.

Regulatory Reform

Qatar has also made strides to tighten regulation surrounding financial crimes in recent years, and this momentum carried into 2019, spurring investor confidence abroad. The QCB confirmed the issuance of Law No. 20 of 2019 on combatting money-laundering and terrorism financing, replacing Law No. 4 of 2010, and Law No. 27 of 2019 on counterterrorism, replacing Law No. 3 of 2004. Qatar has made amendments to a number of laws related to combatting money-laundering and terrorist financing. The most recent changes to the country’s standards bring regulatory practice in line with the norms advanced by international organisations, including the Financial Action Task Force. These reforms form part of a broader effort on the part of Qatar to ensure that its legal and regulatory framework provides the mandate for the country’s National Anti-Money Laundering Committee to take the action necessary to effectively combat illicit finance, and could place Qatar in a leading position in the region in this regard.

New Listings

IPOs in the Gulf region could see healthy activity this year as more private companies and state-owned enterprises make their debut on markets. This comes despite the lower number of primary market issuances recorded in 2019 relative to 2018. The total number of corporate IPOs in the region declined over recent years, falling from 28 in 2017 to 17 in 2018 and nine in 2019.

Initiatives and policies that support and encourage SMEs and family business to launch IPOs could, however, provide support to primary equity markets, and allow investors to tap into entities with a wide variety of business models and product offerings. Only three IPOs have been conducted in Qatar since the implementation of the embargo in 2017. The first was the landmark launch of an IPO by Qatar Petroleum, a subsidiary of Qatar Aluminium Manufacturing Company, in October 2018, which was more than 2.5 times oversubscribed.

This situation may be set to change over the medium term, however, with talks currently under way for listings in areas such as pharmaceuticals, education and shipping, with a loose target of four to seven IPOs per year having been set by the QSE. Easier listing rules are also in the pipeline to remove administrative barriers and attract family-owned companies in particular to launch IPOs. In turn, the number of brokers is expected to increase for several services, while a series of international trade missions are being planned in order to attract listings from overseas companies.

Baladna IPO

Following an IPO that ran from October 27 to November 7, 2019, and which was also oversubscribed, in December 2019 Doha-based Baladna became the third company to float on the QSE since the beginning of the blockade in 2017. Having done so, it is now the 47th company to be listed on the exchange and is categorised within the consumer goods and services sector. It raised authorised capital of QR1.9bn ($521.5m) through its 75% share capital auction, which was only open to Qatari citizens and companies. The offer comprised 1.43bn new shares at QR1.01 ($0.28) each, including a listing fee of QR0.01 ($0.003). The sale comprised 52%, or 988.5m shares, offered to individual and corporate investors, alongside 23%, or 437.2m shares, sold to strategic investors General Retirement and Social Insurance Authority (10%), Hassad Food (5%), Al Meera Consumer Goods (4%), Mwani Qatar (2%) and Widam Food (2%).

Baladna built a dairy business following the trade embargo and has become a crucial part of the Qatar National Food Security Programme, providing dairy products that the country had previously imported. Incorporated in 2014, Baladna flew thousands of Holstein cows into the country from Germany and Switzerland following the onset of the economic blockade in 2017, and has since expanded rapidly to become Qatar’s largest dairy and beverage company. Its herd has grown to approximately 18,000 animals, housed in two farms covering a total area of more than 2m sq metres of desert. During 2019 Baladna expanded beyond the dairy segment into new areas, most notably fruit juice production, shipping its first exports to Afghanistan, Yemen and Oman – making it an attractive time to target QSE flotation. It is already exporting milk to the same three countries and looking at new markets to become a regional leader in the field. Baladna is becoming an integrated food and beverages company, with the establishment of Qatar’s first ultra-high temperature (UHT) production line at an estimated investment of QR21m ($5.8m).

Debt Issuances

Conventionally, GCC regional banks tend to cover their funding needs in debt markets during the first few months of each year. In January 2020 QNB issued a 40-year, $600m Taiwanese Formosa bond as part of efforts to diversify funding sources. Morgan Stanley was the sole arranger of the transaction. Furthermore, in February 2020 QNB – the Gulf’s largest bank in terms of assets – raised $1bn in seven-year bonds, offering a 2.75% coupon in a deal arranged by Barclays, Crédit Agricole, Mizuho, QNB Capital and Standard Chartered, and issued by QNB Finance. The offering attracted more than $3bn in orders.

In November 2019 a total of QR300m ($82.3m) worth of three-month Treasury bills (T-bills), shortterm debt securities issued by the QCB as a policy tool to regulate money supply, were sold at 1.73%. Of this tranche, QR200m ($54.9m) of six-month bills were sold at 1.76%, and QR100m ($27.4m) worth of nine-month T-bills were sold at 1.81%. Following this, the QCB issued QR600m ($164.7m) more T-bills in both January and February 2020.

Sukuk has also emerged as a significant government debt instrument to provide liquidity for project funding. They have been issued by the QCB amid a burgeoning Islamic finance segment (see Islamic Financial Services chapter). In October 2016 the QCB issued sukuk with maturities ranging from three to 10 years in an issuance totalling QR1.5bn ($411.7m), alongside QR1.5bn ($411.7m) in conventional bonds targeted for the domestic market.

As of early 2020 government remains the most active operator in the local sukuk market. However, sharia-compliant instruments accounted for only 14% of total debt issuance in the first six months of 2019. According to the World Bank, Qatar has consistently borrowed in international debt markets at low yields, most recently in March 2019 when it issued $12bn in bonds, against orders of $50bn. As a result of these fiscal policies, public debt has doubled since 2014 to an estimated 53% of GDP in 2019.

Consolidation Activity

During the first nine months of 2019 the total value of mergers and acquisitions (M&A) involving MENA countries rose to a record high of more than $120bn, according to a report published by the financial data provider Refinitiv. The report pointed to slowing growth in both Europe and Asia as important benchmarks for MENA’s comparative momentum. Indeed, when oil prices fell in late 2014, efficiency became paramount, leading Qatar to merge the world’s two biggest liquefied natural gas producers – state-owned Qatargas and RasGas – saving hundreds of millions of dollars a year in operational costs.

Furthermore, in April 2019 the consolidation of operations was finalised between two Qatari banks following a merger that was initially announced in 2018. Barwa Bank and the International Bank of Qatar (IBQ) – now operating under the name Barwa Bank – merged holdings and operations, in a move that reduced the total number of banks in Qatar to 17, while the number of Islamic banks stayed at four. This made Barwa the third-largest bank in Qatar, with combined total assets of $22bn.


The global geopolitical context remains an important determinant of Qatari capital markets activity, both in terms of China-US trade tensions, the exit of the UK from the EU and the ongoing spread of Covid-19. Furthermore, the country faces a number of domestic risks over the medium term. An ongoing real estate downturn poses a risk for both the conventional and Islamic banking sectors, according to a May 2019 report from Fitch. Indeed, rental prices in Qatar softened by 20% between 2016 and 2019, with some Islamic banks beginning to reduce financing to the sector. Nonetheless, the performance of the stock market remains generally robust in Qatar. This, coupled with prudent fiscal policies and ever-tighter regulatory provisions, has placed Qatari capital markets in a solid position.


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The Report: Qatar 2020

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