Qatar Exchange Doha Securities Market

8,879.59 -11.57 -0.13 %

Investors shun Qatari stocks as uncertainty persists

(6/19/2017 2:09:00 AM)

Investors have shunned Qatari stocks even as traded volumes have tumbled and analysts see a more grinding move to the downside.

The Qatar Stock Exchange index has been witnessing selling pressure, with investors in panic mode after Saudi Arabia and the UAE, among others, severed ties with Qatar. The index lost more than 7 per cent of its value on June 5, the day the announcement was made.

“The bleeding [will] continue as long as uncertainty continues, though the magnitude of drop has significantly reduced. The pressure is being felt. Investors are shying away from the market,” Nadi Bargouti, managing director at Emirates Investment Bank, told Gulf News. “We are not talking about fundamentals. All those valuations are questionable in the current environment due to lack of visibility. Volumes are drying up. There is lack of interest in the market,” Bargouti said.

Traded volumes have tumbled from over 1 billion Qatari riyals to just 600 million riyals (Dh999 million to Dh599.41 million).

Naeem Aslam, chief market analyst at Think Markets, also agreed. “There will be more grinding to the downside than panic selling,” said Aslam, chief market analyst, Think Markets.

Qatar, which is also a part of the MSCI Emerging Market Index, has shed nearly 12 per cent since the start of the year, compared to a 3 per cent fall on the Dubai Financial Market General Index.

Dollar peg

Qatar’s 5-year credit default swaps or the cost of insuring risk fell to 90 basis points (bps) compared to 109 bps last week on June 9.

“Its still elevated compared to previous levels, showing panic,” said Bargouti. The 5-year CDS was at 60-70 levels between March and the end of May.

The Qatari riyal’s 12-month forward rate was at 4.60 against the dollar, compared to an all-time high of 5.88 last week. Spot Qatari riyals stood at 3.67 against the dollar.

“The pressure will remain on the Qatari peg. It will depend on the geopolitical situation,” Aslam said.