A week after the UAE, Saudi Arabia, Bahrain and Egypt announced the suspension of diplomatic, transport and economic links with Qatar, the country’s stocks remain firmly in the doldrums.
The country’s bourse, the Qatar Exchange, has the world’s worst year-to-date return; stocks are down 13.5 per cent for the year so far, having dropped 8.4 per cent since tensions increased early last week.
And even after a brief rally at the end of last week, 12 of the 19 stocks on the country’s headline index remain 8 per cent lower than before the crisis.
Such circumstances often present opportunities for retail and institutional investors, who would usually be all too willing to pick up battered stocks such as QNB, the country’s biggest lender, and Industries Qatar at bargain prices.
But this time around investors, particularly institutions outside Qatar, remain wary about re-entering the market, with no end in sight to the country’s dispute with its neighbours and a constantly-lengthening list of antagonists.
“Qatar stocks are valued very cheap relative to their history,” said Hasnain Malik, head of equity research at frontier countries-focused Exotix Capital.
“But before buying them one has to work out what resolves the embargo and diplomatic crisis and the longer and the more countries which involve themselves the harder it is to answer that question.”
The Qatar Exchange on Tuesday closed down 0.4 per cent on Tuesday, the index’s smallest one-day change since the crisis, with trading volumes falling back towards the daily average for the past six months.
But GCC and foreign institutions remained firmly in the net seller camp for the day, to the tune of 31.3 million Qatari riyals (Dh31.4m) and 10.8m riyals respectively.
“Qatar’s valuation is not the cheapest in the region, trading on 14 times forward multiple, compared with Dubai which is trading on 10 times forward multiple,” said Sanyalak Manibhandu, head of research at NBAD Securities.
“So there is more room for Qatar to drift lower on relative valuation.”
Banking stocks such as QNB and Masraf Al Rayan remain vulnerable; the rush by banks in the GCC and elsewhere to cut their exposure to the country’s financial institutions threatens to exacerbate a worrying cash crunch and higher lending costs.
“Ongoing tension will only make it more difficult for Qatari banks to mobilise intra-region customer deposits, while expensive deposits will discourage loan formation,” said Mr Manibhandu.
S&P Global Ratings earlier this week placed four Qatari banks on its CreditWatch with negative implications, warning that their credit quality may be affected if the country’s dispute drags on.
“We classify the authorities in Qatar as highly supportive toward the banking system and expect government support will be forthcoming in case of need,” the ratings agency said.
“However, if the situation is not resolved relatively quickly, it might exert further pressure on banks’ credit quality.”
The malaise impacting Qatari stocks has so far not impacted stocks across the wider region. Shares in Dubai and Abu Dhabi have risen 3 per cent and 1.2 per cent respectively since the crisis began on June 5, even as Saudi stocks have slipped by 1.5 per cent.
jeverington@thenational.ae
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