The Qatar Stock Market
Before discussing Qatar’s stock market, let us gain some relevant information about the country itself. Qatar is located in the continent of Asia and covers over 11,000 square kilometers of land which makes the country the 168th largest nation when looking at land area. Qatar became an independent state in 1971 gaining its independence from the United Kingdom with a population of 1,951,591 people in 2012. The currency is the Qatari Rial (World Atlas, 2015).
When viewing the stock market, there is information that every investor should know about Qatar before investing in the market as many wonder if Qatar is characterized by external efficiency (availability of information) that helps fair trading. Analysts advise investors that they should not stop investing; however, investors need to understand that the business culture and the risks in the region can erupt with political strife at any time. The country’s largest trading partner is the United States and the United States also has a large military presence in Qatar.
Qatar’s economy is dominated by the public sector with more privatization of state controlled enterprises. Qatar has had a stock market since 1997 known as the Qatar Exchange with 44 regional companies listed (Koba, 2011). The Qatar Stock Exchange supports a record of brokerage firms. Investors should be prepared for an erratic ride within the Qatar Stock Exchange thereby not being assured relative to returns.
As an example, Advisors state that when viewing Qatar government bonds, it is best to look at Wall Street which offers a structured view of products providing coverage concerning Qatar investments whether the investor is a small or large investor.
Trading on the Doha Securities Market is restricted to Qataris but foreign investors are allowed to own up to 47 percent of mutual funds that are created by trading institutions in the future. Turn-over is also expected to grow between 15-25 percent each year with the new Securities Market expected to facilitate further privatization in the future (Coleman).
Another consideration relative to Qatar’s Stock Market is that Qatar is engaged toward the institutional investor or groups that pool their money similar to retirement or hedge funds. Most retail investors would view investing by using a full service brokerage firm that has access to bonds relative to the market. So when asked if the Qatar Stock Market is characterized by external efficiency or availability of information that helps trading to be fair, the answer is yes. The investor must understand the process of trading in this country and how the country reveals information. Qatar’s stock market is different from the way in which Wall Street handles investing. This is vital information that must be understood by the investor before making the decision to invest in Qatar’s Stock Market.
Is The Qatari Stock Exchange Internally Efficient?
Qatar’s Financial Markets Authority issued rules on margin trading or (boundary trading) on September 2014. Before this process was put into place, the process was only mentioned as a regulated activity under a quantified law that had been created in 2012. This boundary trading process for the customer defines in detail the rules that cover the opening of an account up to registering of shares with Qatar; as well as the registering increases on the customer’s accounts that are opened by the financial services firm that manages the account for the customer. This process assists the Qatar Stock Exchange to be internally efficient thereby enhancing demand and supply to be fair in pricing (Qatar, 2015)
The financial services company ensures internal processes as the service has priority rights that can be used to recover its debt from customers over the securities purchased by boundary trading. It is very important for trading to be fair and equity not just for the country but for the people. A permitting application must also be supported by audited and unaudited financial statements as well as a report on boundary trading data processing systems that are applied by the financial services company and a boundary trading account opening form and agreement (Qatar, 2015)
The Qatar Exchange operates as the financial market in Qatar as well as the implementer of the Qatar Financial Markets Authority. There is a process being considered to issue a new rule to include the exchange specific operational guideline on boundary trading. Exercises and discussions are taking place at this time with the Qatar Financial Markets to begin the issuance of new QE rules on boundary trading. It is believed that the obtaining of the Qatar Financial Markets Authority license to carry out boundary trading activities will require working in unison with the QE and applications that will shape the QE rules on boundary trading (Qatar, 2015)
Improvements are needed in Qatar’s stock markets to reduce vulnerability to speculators thereby attracting long term investors. Instability has the tendency to expose speculative nature of trading on the region’s markets. It is far better to attract foreign investors with a long term approach to investments. Market benefits a country making it easy to raise a huge amount of money from the people who choose to invest in that country. Stocks usually do not represent debt unless the money has been borrowed to buy those stocks (Volatility, 2014).
The Qatar Exchange started its uneven upward climb in the middle of 2012 with the long term impact of this estimated to be huge amounts of additional money being invested in the stock exchanges as fund managers who follow MSCI’s emerging market indices purchase equities from Qatar as well as the UAE.
Between 2008 and 2012, Qatar watched its GDP grown to an outstanding 86 percent based on information gained from the World Bank. But what is of greater importance is for Qatar to keep the excitement and growth thereby drawing investors when they stop being what is viewed as the big fish of the frontier markets pond. Investors that are looking for emerging markets exposure will most likely focus on other economies as well as Qatar in the future (Backman, 2014)
Qatar’s Stock Market does provide availability of information that does assist in fair trading and Qatar’s Stock Market is internally efficient thereby enhancing demand and supply that encourages fairness in pricing. The country is making changes to enable investors to gain better return on investment thereby assisting Qatar in the improvement of its stock market.
References
Backman, M. (2014, May 29). Qatar, UAE about to get major upgrade. Retrieved May 7, 2016, from http://money.cnn.com/2014/05/29/investing/qatar-uae-economy/
Coleman, D. Y. (2015). Qatar: 2015 Country Review. Qatar Country Review, 1-227.
Koba, M. (2011, April 5). What Every Investor Should Know About Qatar. Retrieved May 7, 2016, from http://www.cnbc.com/id/
Qatar: Regulating margin trading. (2015). International Financial Law Review, 1.
Volatility hits stock markets. (2014). MEED: Middle East Economic Digest, 58(21), 4.
World Atlas. (2015). Where is Qatar? Retrieved May 7, 2016, from http://www.worldatlas.com/as/qa/where-is-qatar.html
