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MENAFN - The Peninsula - 01/01/2011

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(MENAFN - The Peninsula) Foreign institutional investors - among them giant pension funds of repute - are bringing much-needed stability to the Qatari bourse with their trust in the market as evidenced by their strong net buying and long-term investment outlook.

A highlight of 2010 has been that increasing numbers of foreign institutional investors (FFIs) have made forays into the local bourse and their net buying has been quite strong.

They were involved in less of offloading in 2010, which is suggestive of their long-term investment policy.

According to a prominent economist who is also a celebrated stock analyst, Hashim Al Sayed, foreign institutions accounted for nearly 24 percent of total buys in the year (2010).

Their local counterparts (the Qatari corporate sector), though flush with surplus funds, lagged behind in terms of net buying as their share in the total was barely 20 percent.

Al Sayed, who attempted a quick review of the 2010 figures and came out with an enlightening comparative analysis of Qatari stocks, told The Peninsula yesterday: "Qatari institutional investors, on the other hand, generally take a short-term view."

And as for Qatari retail investors, they are faster in offloading shares too, said Al Hashim, who is also a well-known columnist on economic affairs and stocks.

Their buys accounted for 40 percent of the year's total while their sell volumes amounted a little more to 43 percent of the total.

Qatari investors focused more on Qatar National Cement Company shares in 2010, while foreign institutions put more accent on listed entities such as Qatar-Oman Investment Company and Ahli Bank, arguably due to their good management and prospects.

Nearly 36.3 percent of the traded shares of the above firms were bought by foreign investors, said Al Sayed.

Data show that Qatari investors concentrated more on family businesses like Zad, Al Mannai and Aamal that have turned public and are listed on the bourse.

This could be because their original owners and their families might be holding chunks of shares of these companies and are not offloading them.

But a major shock for analysts in 2010 has been that while the market capitalisation of the bourse has risen by a staggering QR130bn over 2009 (from QR300bn in 2009 to QR450bn by 2010-end) the trading value has dropped by a significant 27 percent.

The decline in the trading value has taken place despite the index rising more than 1,700 points in 2010 over the previous year. The overall growth last year was 24.7 percent.

Al Sayed said whereas the trading value totalled an impressive QR92bn in 2009, it fell to almost QR67bn by 2010-end. He attributed the drop to a mix of factors, among them foreign institutions coming in large numbers and making long-term investments on Qatar Exchange.

The other factors could be a possible decline in the number of small or retail investors and decreased speculative activity. "Also, a lot of FFIs exited from the market in 2010 to organise cash in view of the constraints posed by the global recession and many of them didn't get back to the bourse," said Al Sayed.

Talking of the outlook for the bourse in the current year (2011), he suggested that due to the award of the 2022 FIFA World Cup to Qatar, more liquidity is likely to flow to sectors like real estate, construction, industry and trading.

He said since the state-run Qatar Development Bank (QDB) has set up a special fund worth QR2bn to encourage small and medium enterprises (SMEs) more investors could be attracted to the manufacturing sector to take advantage of state incentives.

"We shouldn't, therefore, expect any spectacular growth on the Qatari bourse this year. The rise in stock values this year could be usual like the one witnessed in 2010," said Al Sayed.

Still, the year 2011 could well go down in the annals of Qatar Exchange as the one that provided much-cherished stability to the market, he added.

 






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