Qatar (QAT) : No improvement on the horizon

The QAT ETF (Ishares) created in 04/2014 USD is listed on the Nasdaq and replicates the MSCI All Qatar Capped Index which is composed of the 28 main Qatari stocks, mostly banks.

The creation of this index coincides with MSCI's decision to reclassify Qatar from "Frontier" status to "Emerging" status and is the first and only ETF to date focused on Qatar. This index embodies a significant risk related to the evolution of the local currency the Qatari Riyal.

The fees of this ETF are 0.64% for AUM of $ 49M. The replication method is direct (physical) and there is a dividend distribution policy.

Alternative ETFs: N / A

Index & components

The MSCI All Qatar Capped Index is quite narrow with only 28 stocks, with a strong weighting in the financial sector (c.59%), including nearly 25% for Qatar National Bank, while energy is poorly represented (3%). This is explained by the fact that the state owns a large part of this sector. The 40% of non-financial companies are mainly industrials (18%), real estate (10%), telecoms (8%) and utilities (4%). However, Qatar's economy is very much linked to energy, which is reflected in all other sectors of the economy.

Led by Emir Tamim bin Hamad Al Thani, Qatar has been a major player in the Arab Spring, thanks to its financial support for the Muslim Brotherhood movement. Nevertheless, this activist positioning in the region has degraded its regional image. On 5th June, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, later followed by Yemen, Libya and the Maldives, broke off diplomatic relations with Qatar, accusing it of financing and to support terrorism, and its proximity with Iran. Land, sea and air borders have been blocked, affecting imports, especially food. Turkey and Iran have supported Qatar, and Kuwait and the United States are acting as mediators to settle the diplomatic conflict.

This tiny country (2.6 million inhabitants, 80% of whom are foreigners), however, enjoys great financial stability, it is the richest in the world per capita (in purchasing power parity), according to the IMF : as the world's third largest gas reserves owner, it is the world's leading exporter of liquefied natural gas (LNG). Although the crisis may increase the price for the organization of the 2022 Football World Cup, the $ 200 billion of planned public investment in infrastructure will likely support the growth of Qatar in the coming years. Above all, the emirate has a war chest of about 330 billion dollars, via the international holdings of its sovereign fund, Qatar Investment Autorithy (QIA). The reserves in which the Central Bank has drawn in recent weeks do not include foreign assets held by the sovereign fund, which has a colossal financial reserve.

Qatar should be able to continue until LNG exports are undisturbed. An unlikely disturbance due to the region's dependence on Qatari gas. The oil and gas sectors, weakened by the fall in energy prices, recorded negative performances in 2016, but should support growth in 2017 following the start of production at the Barzan site (increase in liquid gas production by 21%). %). The non-oil sectors were dynamic in 2016, and will remain so this year, driven by the construction sector (+ 11.7% in the first quarter of 2017 compared to the previous quarter) and services.

The construction sector is one of the beneficiary sectors of the Qatari government's investment policy in preparation for the 2022 World Cup. Although a moratorium was imposed on new projects, the planned investments would remain substantial and are valued at nearly $ 180 billion. The services sector (financial services, real estate and telecommunications) is expected to post a solid growth rate in 2017.

 

Latest developments

After falling -19.4% in 2015 and -1.1% 2016, the drop accelerated in 2017 to -28.2% due to extreme tensions and the blockade exerted on its economy by its neighbors Saudi Arabia, the United Arab Emirates and Bahrain who broke with Qatar, accused of "supporting terrorism" and getting closer to Iran, Ryad's great regional rival.

The restrictions imposed for more than four months in Qatar, begin to have negative effects on the economy of this small gas emirate of the Gulf, but it remains solid for the moment. Moreover, since the announced embargo, the Turkish allies and the Iranian neighbor have delivered goods to Doha, which mitigates the effects of scarcity. However, the crisis seems likely to last because of the status quo, and the rating agencies Fitch, Moody's and Standard and Poor's (S & P) have placed Qatar under negative watch, S & P even downgrading the country while foreign exchange reserves plunged by 30% compared to June 2016, now at their lowest level since May 2012. Banks and investment funds withdrew their funds, in the face of uncertainties leading to a fall in reserves, while the Central Bank is trying to lower the pressure by injecting liquidity and draws on its reserves to support its currency, the Qatari riyal falling against the US Dollar.

Growth forecasts have been lowered from 3.4% to 1.4% for 2017, and inflation forecasts have been raised from 1.5% to 1.8%, driven by the expected rise in the prices of imported products, such as foodstuffs. In addition to their impact on the revenues and profits of the national airline Qatar Airways (cancellation of flights, longer journeys), the air restrictions also threaten the position of global hub acquired by the Doha International Airport.