Satyendra Pathak
Doha
The Qatar Stock Exchange (QSE) is poised for recovery, supported by a projected growth in full-year earnings and dividends, QNB Financial Services (QNBFS) has said in a report published on Sunday.
Continuing the year-on-year (YoY) positive trend observed since the fourth quarter of 2023 (4Q2023), earnings for 4Q2024 are expected to grow by 4.8 percent YoY for the coverage universe, according to the report.
This follows a robust 7.8 percent YoY and 11.1 percent quarter-on-quarter (QoQ) growth in QSE’s aggregate earnings for 3Q2024. Key contributors to this YoY growth include the banking sector, which benefits from cost containment, stable provisions, and flat margins, offset by weaknesses in industries such as Industries Qatar (IQ). However, sequential declines are led by banks due to significant credit provisions and impairments.
Aggregate earnings for the coverage universe are expected to grow by 6.6 percent in 2024, with a 1.5 percent increase in total dividend payout, translating to a 4.8 percent dividend yield. This optimistic outlook is anchored by Qatar’s strong liquefied natural gas (LNG) fundamentals, bolstered by the North Field expansion project and long-term LNG supply contracts.
In the non-oil and gas economy, government efforts to diversify the economic base continue to yield results. Robust tourism numbers since 2022 support the target of attracting six million visitors annually by 2030. Additionally, December’s Purchasing Managers’ Index (PMI) of 52.9 confirms consistent growth momentum in the non-oil sectors.
Despite high interest rates, the report said the global economy has shown resilience, particularly in the US, offsetting weaknesses in China and Europe. However, global growth is expected to decelerate from an estimated 3.2 percent in 2024 to 3 percent in 2025, according to Bloomberg consensus. The resumption of interest rate cuts by central banks, including the Federal Reserve and Qatar Central Bank (QCB), could stimulate growth further.
While geopolitical tensions, inflation concerns, and a global minimum corporate tax pose challenges, the report said, the Qatari market offers attractive opportunities for long-term investors due to several factors.
The QCB’s 115 basis points reduction in benchmark rates since early 2024 enhances Qatar’s yield appeal. With high dividend yields and robust financial metrics, Qatari equities become increasingly attractive.
Favorable supply-demand conditions, supported by geopolitical developments and Qatar’s conservative oil price budgeting, strengthen financial stability and credit availability.
Qatar’s record visitor arrivals in 2024 reflect the success of its tourism initiatives. The nation’s sports and MICE (Meetings, Incentives, Conferences, and Exhibitions) tourism sectors are expected to drive further growth.
Share buybacks, interim dividends, and potential IPOs signal corporate confidence. Notably, QNB Group’s QR2.9 billion share buyback programme and the introduction of interim dividends by ten companies in 2024 set a precedent for shareholder value enhancement.
The North Field Gas Expansion, growing tourism, and investments under Qatar National Vision 2030 provide a solid foundation for sustained corporate earnings growth.
"Qatari companies boast robust balance sheets, low leverage, and strong return-on-equity ratios. The banking sector, in particular, stands out for its exceptional capital adequacy and profitability. With valuations appearing attractive historically and relative to peers, QSE is well-positioned for long-term growth,” the report said.
Despite potential short-term volatility, the report said, QSE is expected to perform better in 2025, supported by global economic trends, robust local fundamentals, and technical market indicators. The combination of strong earnings growth, dividend yields, and defensive market characteristics underscores Qatar’s position as an appealing investment destination.
"As global and local factors align, QSE’s recovery trajectory remains firmly in place, presenting significant opportunities for investors seeking long-term value in a resilient and dynamic market,” it said.