Qatar increasing pace of asset sales as Gulf boycott takes toll

Qatar Holding sells $662 million stake in Hong Kong department store

The Qatar Investment Authority, which has reduced its direct holdings in Tiffany & Co. in recent months, is selling more of its assets. Michael Nagle / Bloomberg

Qatar is ramping up asset sales with a $662 million sale of a Hong Kong department store operator at the end of March being the most recent divestment as a ten month Arab quartet boycott of the Gulf state takes its toll.

Qatar has been forced to repatriate significant sums from its sovereign wealth fund to shore up its struggling economy, which continues to experience the impact of an economic and political boycott by its Arabian Gulf neighbours and other countries. Saudi Arabia and the UAE together with Bahrain and Egypt, cut ties with the country on June 5, accusing Doha of supporting terrorism, a charge it denies.

While Qatar has denied the sales are a result of mounting financial pressures following the severing of ties by the Arab quartet over Doha's support for extremists, liquidity in its banking system has come under strain.

Ratings agency Moody’s Investors Service estimated in September that the country had burnt through $38.5 billion of its financial reserves in June and July.

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Qatar Holding, a unit of the country’s sovereign wealth fund the Qatar Investment Authority, sold its stake in Lifestyle International Holding and Lifestyle China Group for $5.2bn Hong Kong dollars (US$662m) in late March.

The sale comes amid a number of divestitures that Qatar’s sovereign wealth fund has made since June including a reduction in its stake in Credit Suisse, Switzerland’s second biggest bank, and the luxury jeweller Tiffany’s. The sale of 4.4 million shares of Tiffany raised about $417 million. In the case of Credit Suisse, the Qatar Investment Authority reduced its stake in the Swiss bank by not participating in its capital increase last year.

In March, Qatari Diar, the property unit of the Qatar Investment Authority, said it was selling 26.1 million shares in Veolia Environnement for roughly $640m.

The state has also put the brakes on new investments. In August, the country's flagship carrier Qatar Airways abandoned plans to buy a 10 per cent stake in American Airlines. The Doha-based airline expects to post a loss for its current fiscal year as a result of the political rift which forced it to cancel some routes and divert others. The carrier is seeking other forms of financing to survive and may call on its state owner to provide extra funding if the boycott continues, Qatar Airways chief executive Akbar Al Baker told Reuters TV at an annual tourism fair in Berlin in March.

“We will announce a very large loss during the current financial year which ends this month,” he said.

Ali Shareef Al Emadi, the country's finance minister, told the Financial Times  in October that the Qatar Investment Authority, whose assets under management are estimated to stand at about US$300bn, had brought back more than $20bn into the country since the stand-off with its neighbours began in June.

Qatar’s banks had their outlook downgraded to negative from stable by Moody’s in Aug­ust amid weakening operating conditions and continued funding pressures facing lenders in the wake of a political crisis between the sheikhdom and neighbouring countries.

There have been fears that the Gulf states opposing Qatar may withdraw deposits from the country’s banks, pushing the cost of borrowing higher.