The Qatar Stock Exchange's (QSE) main QE Index was the best performer in the GCC region in 2018 with 20.8% returns. While part of this may be attributable to lower index level at the beginning of 2018 due to blockade impact, such a strong recovery amid volatile global markets depicts resilience of Qatar economy. During the year, net foreign buying of more than USD 2 bn has further substantiated investors' appetite for Qatari stocks. Total market capitalisation of Qatar stock market surged 24.7% to QAR 588.7 bn with trading value and volume rising 3.4% and 7.3% respectively. In line with its index weight, Banks and Financial Services sector led trading value during this year with 45.1% of the total trading value, followed by Industrials sector - 20.7%.
Within sectors, Banks & Financial Services was the top gainer with 42.8% return led by 55% rise in Qatar National Bank and 57% increase in Qatar Islamic Bank. Conversely, Insurance and Telecoms were the key laggards plunging 13.5% and 10.1% respectively. Baring these two, all the other sector indices posted double digit returns in 2018.
The year 2018 saw another progressive development of the Qatari Financial Market. On 5th March 2018, the nation's first Exchange Traded Fund (ETF) began trading on QSE. The ETF was built to track QE Index which consists of the top 20 listed companies in Qatar by market capitalization and liquidity. It aims to maintain the lowest expense ratio compared to any MENA equity fund globally and will make annual distributions to unit holders based on income received from underlying securities.
This investment tool was not just to strengthen the diversification of the financial sphere of the Qatari market but it also came at a time when Qatar was recuperating from the impacts of the boycott by neighboring states. The trading of the ETF is well aligned with authority's objective of enhancing liquidity and attracting foreign funds.
Last year, while Qatar outperformed GCC region in terms of market return, it also saw the largest value IPO in the MENA region with the listing of Qatar Aluminum Manufacturing Company (QAMCO) on QSE. QAMCO was listed in Q4-18 and it raised USD 745.6 mn. Qatar Petroleum, the sole founder of QAMCO, had proposed share capital of QAR 5.58 bn with 558 mn ordinary shares. Qatar Petroleum retained 51% and floated the remaining 49% to the public. The investor's positive perception regarding QAMCO was eminent in the fact that the IPO was oversubscribed 2.5 times. It was another event in that year speaking about the healthy sentiments in the Qatari market.
Qatar Financial Markets Authority (QFMA) & QSE continuously focuses on enhancing & upgrading Qatar's capital markets to serve as a model in financial services. In recent times, QFMA has approved regulations governing the activity of the market maker which constitutes a new addition to the financial services activities. Similarly, the operational procedures of ETFs have also been approved including the short sale of these units as well as treasury shares and treasury bills and introduction of unified listing rules. Furthermore, QFMA issued a number of rules, regulations and legislative systems that contribute to the activation of its supervisory role and investor protection.
QSE launched its online ESG (environmental, social and governance) platform in 2018. In addition, it also launched a unified electronic disclosure system project using Extensible Business Reporting Language to strengthen disclosure practices and enhance the efficiency of data dissemination. Besides, in order to boost the attractiveness of investment in the stock market, the QSE urged listed companies to raise foreign ownership limits in their shares to 49% instead of 25%, to which many of the largest companies responded, led by the subsidiaries of Qatar Petroleum. All the above developments show the continuous efforts of regulators to enhance the Qatar's financial market.
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