Satyendra Pathak
Doha
Qatar’s stock market has powered ahead of its regional peers in the first ten days of 2023, rising 7 percent, QNB Financial Services (QNBFS) has said in a report released on Wednesday.
"We cannot rule out near-term volatility but stay bullish longer-term on Qatari stocks given their defensive characteristics backed by their strong fundamentals. The QSE’s aggregate valuation metrics look attractive considering we do not see any marked near-term earnings recession,” QNBFS said in the report.
The year 2022 was an extraordinary year with global stock markets bearing the brunt of global central banks’ hiking of interest rates and retrenchment of quantitative easing as they attempted to fight multi-decade-high inflation levels.
Like most markets, the report said, Qatari equities have not been spared. The QSE index finished 2022 down 8.1 percent, which was behind regional peers but considerably better relative to global equities. From a technical viewpoint, the QSE has not experienced two consecutive down years since 2001 and it has, on average, returned 19.6 percent the year following a negative annual performance.
"Overall, foreign institutions were $4.36 billion net buyers of Qatari equities in 2022 despite December seeing sustained selling pressure, becoming the only month in 2022 to record net selling of $200 million by foreign institutions,” the report said.
"While the 4Q2022 reporting season should generally be perceived positively, it is unlikely to drive near-term equity performance as global monetary conditions and recession fears play out and dominate sentiment. Although we expect the market to remain volatile, we continue to remain positive longer-term on the Qatari market due to the following reasons like robust (but volatile) oil and gas prices,” it said.
Strong gas and oil prices should lead to higher government revenue and surplus for Qatar and enable flexibility in government expenditures and improve overall money supply, it said.
Furthermore, the report said, "With the recent successful hosting of the World Cup, perceived as one of the best editions and putting Qatar on the global business map, we opine that the Qatari stock market should benefit from this success, a view also supported by empirical data.”
On top of Qatar’s macro strengths, the report said, Qatari companies enjoy robust balance sheets backed with low leverage and decent RoEs, while Qatari banks stand out with their exceptional capital adequacy ratios, healthy NPLs, strong provision coverage, and high profitability.
"We estimate banks under coverage, ex-QNB Group (QNB) which we do not cover, to experience YoY earnings growth of 56.4 percent, mainly due to healthy revenue, cost containment, lower provisions, and base effects attributed to Doha Bank and Masraf Al Rayan.
Excluding Doha Bank and Masraf Al Rayan, the report said, earnings are still expected to have robust growth of 23.1 percent.