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The investment case for Qatar

17.04.22 12:00

Still unnoticed by many global investors, Arab stock markets are year-to-date the best performing stock markets globally while major developed markets like the US and Europe are down year-to-date.

Qatar’s QE index with YTD +22.62%, Qatar is currently the 3rd best performing stock market globally and as a winning football team, the trend and momentum in Qatar could be an investor’s friend.

Saudi Arabia’s Tadawul index with +19.91% is the 4th best performing market globally, followed by Kuwait with 19.88%. in the regional Arab and GCC economic comparison however it is Qatar that is leading the region.

Stock markets run on “narratives” and the growing narrative for Qatar is that Qatar remains one of the most promising markets in the GCC region and worldwide, primarily due to positive momentum from the country’s huge LNG expansion, favorable energy prices, and hosting FIFA World Cup Qatar 2022. Among the global safe-haven alternatives for investment, the Qatar Stock Exchange has been a key beneficiary of flight-to-safety for investors looking to sidestep the Russia/Ukraine crisis.
The economy of the State of Qatar is one of the richest in the world based on GDP per capita, ranking generally among the top ten richest countries in world rankings for 2015 and 2016 data compiled by the World Bank, the United Nations, and the International Monetary Fund. The country's economy has grown despite sanctions by its Arab neighbors, Saudi Arabia and the United Arab Emirates.
This year’s soccer world cup in Doha is widely expected to bring a boost to the gulf economy and make international investors more aware of Qatar and its opportunities.
Qatar’s demand for oil products, boosted by an expanding airline and a pre-World Cup spending spree, is bucking a trend of slower consumption growth and even contraction in the Arab GCC region as Gulf economies slowed on lower oil prices before the Ukraine war.

For a long time, Doha and Qatar have been in the shadows of better-known Dubai in the UAE as an investment destination and travel, transit hub. Similar to how the 1988 Seoul South Korea Olympics firmly established South Korea’s economic and business arrival, the 2022 football soccer world cup could do the same for Doha and the state of Qatar.
Qatar remains one of the most competitive and powerful economies in the gulf / GCC region. known for its gas reserves, Qatar has not been affected by the drop in the price of oil to the extent of other countries that heavily rely on oil exports. The unfortunate Russia Ukraine war and the disputed Russia to Europe gas pipeline of Nord stream two is opening a significant potential for Qatar. As the recent Germany Qatar gas deal has shown, helped Germany to reduce its dependency on Russian gas.
Germany recently sealed a long-term agreement with Qatar for the supply of liquefied natural gas as Europe’s largest economy seeks alternative energy suppliers to Russia.

The Qatar world cup application similar to Russia hosting the FIFA tournament was alleged to be shrouded in controversy and what the American legal system calls “facilitated payments."
Qatar denies allegations of corruption in World Cup 2022 bid US Department of Justice indictment said bribes were paid to football officials to secure their votes. In 2014, FIFA cleared Qatar of wrongdoing in their bid to host the World Cup after an investigation.
From its successful bid to hold the 2022 World Cup to its preparations for the monthlong tournament, Qatar has been a controversial choice. Current concerns also or still focus on human rights and treatment of foreign workers from countries like India and Bangladesh
A 2013 exposé in the British newspaper The Guardian revealed widespread exploitation of laborers helping to build World Cup infrastructure. In 2019, the United Nations assailed Qatar for racial discrimination, saying a worker’s nationality plays an “overwhelming role” in how he or she is treated. The soccer preparations shined a light on the Gulf region’s “kafala” (sponsorship) system, under which workers need permission from their employer to switch jobs, return home or even open a simple retail bank account.

Qatar refuted allegations related to the treatment of laborers; authorities set about building new living quarters for workers and promised to improve safety. Qatar, whose workforce is 95% foreign, introduced new labor laws in 2020 meant to guarantee a minimum wage and make it easier to move jobs in what it says is an effort to dismantle the kafala system. Increasingly, the reforms make Qatar’s labor laws among the most worker-friendly in the Gulf.

the 2018 FIFA World Cup is widely believed to have helped burnish Russia’s international standing, now it’s the turn of Qatar to try and benefit from the enduring relationship between sport and politics. The Qatar FIFA World Cup 2022, is expected to act as an important catalyst in driving the domestic market.
Qatar is in the second year of a $200 billion infrastructure upgrade ahead of hosting the 2022 soccer World Cup. It plans to build eight stadiums, a $35 billion metro and rail system, and a new city for 200,000 people north of the capital, Doha. Qatar Airways added at least 29 planes to its fleet since moving to a new airport in 2014, a facility it plans to expand before the World Cup.
According to Qatar’s Supreme Committee for Delivery and Legacy, this major global event is expected to contribute $20bn to the economy, in sectors such as tourism, sports, and construction.
QAT iShares MSCI Qatar ETF as a country ETF has a dividend yield of 1.91% and is a low-cost exposure to a very well diversified long Qatar as a county call exposure asset allocation decision. QAT last close was $24.82.

Qatar so far has outperformed the SPY (S&P 500) ETF by +31.49%. QAT has also outperformed global equities ETF URTH iShares MSCI World ETF by +32%. When it comes to investing in Qatar the pearl of the Persian Gulf, the trend may well be your friend.

QNB Qatar National Bank with a 23.761% allocation is the largest single stock holding in the QAT iShares Qatar ETF. QNB is rated A as a long-term rating by rating agency Standard &Poor’s, stand-alone credit profile stands at BBB.
The QAR (Qatari Rial) is pegged to the USD at a rate of 1 USD/QAR 3.64 and is allowed to fluctuate in a band between 3.6385 and 3.6415. higher interest rates in the U.S and the U.S., dollar have historically been positive for Middle Eastern banks and countries like Qatar who peg their currencies to the U.S dollar. Qatar is assembling one of the most advanced multi-modal transport infrastructure systems in the world that will facilitate long-term sustainable economic growth through the movement of people, goods, and information.

Rainer Michael Preiss serves as an investment advisor & portfolio strategist.
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