Author name: Rashid bin Ali Al-Mansoori, CEO, Qatar Stock Exchange
QSE CEO Al-Mansoori welcomes WFE to Doha for its 2015 Annual Conference and gives some insights into QSE's ambitions to become a regional IPO centre, the state of the Gulf's financial markets and his plans for the world's biggest Sharia-compliant ETF.
Tell us a little about QSE's corporate vision, current business model and growth strategy
Since its inception, the Qatar Stock Exchange has grown to become one of the leading stock markets in the Middle East and GCC region with the second-highest market capitalization in the region
QSE Sets Sights On Becoming Major Regional, Even Global IPO Center
The primary aim of the Qatar Stock Exchange is to support Qatar's economy by providing a venue for capital raising for Qatari companies as part of their corporate strategy and giving investors a platform on which they can trade a variety of products in a transparent and efficient manner. The Qatar Stock Exchange also provides the public with access to market information and also ensures correct disclosure of information.
The Qatar Stock Exchange is an exchange leader in the GCC region and a natural marketplace for investors and issuers both locally and from across Europe, Asia and the Americas. The exchange is an important tool for sustainable wealth creation for the state of Qatar and for the region. It will be central to the government's goal of creating a viable financial services industry and an efficient capital market in order to diversify the Qatari economy. The Qatar Stock Exchange aims to be a major centre for regional and international initial public offerings (IPOs) as companies look to access investors in the region. Additional cash market products are being developed and sophisticated indices have been designed for investors in Qatar and other GCC markets.
QSE launches Venture Market To Fund SMEs
The Qatar Stock Exchange is the driving force behind a transparent Qatari capital market. By providing state-of-the-art infrastructure and technology, engaging in product and market development and taking comprehensive measures to advance investment culture in Qatar, the Qatar Stock Exchange contributes to the strengthening of the domestic capital market and its international competitiveness.
The Qatar Stock Exchange contributes to the steady growth in supply of as well as demand for capital through its ongoing information and communications work on the national and international level, e.g. by acquiring new issuers, private and institutional investors, trading participants as well as data and index license customers.
As part of its strategy, QSE recognizes the importance of the SME sector which globally provides the foundation for successful economies, contributing employment opportunities, wealth creation and increased output. With the addition of the QE Venture Market to our listing opportunities, we are providing young and entrepreneurial companies a customized route to market to ensure they have access to the necessary funds to contribute to Qatar's economy. The characteristics of the market reflect the objectives of allowing SMEs to list and raise capital more easily and cheaply and with less stringent requirements than would be the case on the Main Market.
MSCI EM Upgrade Boosts QSE Trading
QSE has an ambitious strategy to increase liquidity in the market and attract more local and international investors. We recognize that developing liquidity in the market is important and we continue to develop and introduce initiatives to further enhance the market. The upgrade to emerging market status by MSCI, Standard & Poors, and recently FTSE has led to significant increases in trading activity and market depth. Average daily turnover increased by 160% during 2014 compared to that of 2013.
As a means of improving the breadth of the market, and to further improving liquidity, the QSE continues to promote the exchange as an attractive venue for new listings. We expend considerable resources in ensuring that registered companies, whether family or privately or indeed government owned, are aware of the benefits of listing on the exchange. We recognize that issuers are attracted to liquid markets as it demonstrates strong market fundamentals, giving them the confidence to tap the market as a source of equity finance.
Strong Economic Fundamentals Underpin Qatari Equity Market
One of the main factors supporting the Qatari equity market is the strong fundamentals of the Qatari economy. Qatar's public projects and investments are progressing as planned and will not be impacted by the drop in oil prices in international markets.
The second factor for having a positive outlook for Qatar's equity market is the population growth which will lead to increase demand in government infrastructure projects. High public spending rates will fuel both public and private corporates with profitable infrastructure projects.
As an exchange group, we are interested in revenue diversification and looking at opportunities to expand into different geographies and complementary businesses like technology, exchanges, market data and indexes. We also see post trade as a key revenue driver for the QSE.
How global/international is QSE? Is the exchange open and accessible to foreign investors?
Qatar Stock Exchange has achieved significant growth since its inception. It is now a well-established national institution that offers various investment opportunities for both local and international investors.
Based on this pivotal role, Qatar Stock Exchange has introduced various mechanisms to assist investors, including DvP, liquidity provision and Direct Market Access (DMA) schemes.
QSE is working to expand its global business beyond its local market and the GCC. Since 2014, MSCI, S&P, and FTSE classify Qatar Stock Exchange as emerging market. These are mere examples of our efforts to attract more global investors to QSE market.
It is to be noted that the upgrade of Qatar's status reflects the fact it meets the qualitative requirements for inclusion in the Emerging Markets category, especially the degree of openness of the market to the international investment community and an established and well-tested operational framework.
The recent upgrade does not by itself ensure increased visibility of existing listed companies before foreign financial powerhouses. Indeed, we had already seen an increase in account opening at the exchange by foreign institutions.
The increase of the FOL is very positive for the Qatari market because it is an attempt to increase their share or exposure to the emerging markets index. The increase in FOL also indirectly opens up Qatar's energy and banking system for more strategic foreign investors, especially in view of the fact that Qatar is a rich country with lots of wealth and its banking sector is profitable.
Roadshows reveal rising international interest in Qatar
There has been a clear increase in interest in Qatar overall and our listed companies both before the formal inclusion and thereafter. We saw this quantitatively in the roadshows we held in 2014 and 2015 where there was increased interest in meeting our listed companies from a broader spectrum of investors, including some who had not looked at Qatar in great detail previously.
On the other side, Qatari investment in mega infrastructure and energy projects has promising aspects in terms of supporting the growth of real estate, transportation, banking, industry, insurance and other related sectors represented by some blue chips in the exchange market. These developments are likely to encourage foreign investors to feel bullish about the Qatari economy in the coming years.
Generally, and for the sake of international investments, QSE has been characterized for its transparency and governance to ensure safe investments for all types of investors. QSE is also characterized as the perfect place to invest in different sectors as a result of having listed companies that belong to diverse sectors. These listed companies are not only the largest companies in Qatar, but they are also amongst the largest companies in the region.
With regard to attracting foreign investment, the Qatar Stock Exchange has continued its quest to provide the best practices for attracting foreign investments into the domestic market. For example, we worked on:
- Improving liquidity and expanding QSE membership base and custodians
- Facilitating listing procedures and developing investment products
- Improving disclosure and transparency applications
Are there any special business projects or topics which you would like to highlight?
Qatar Stock Exchange has achieved significant progress and made remarkable achievements at legislative and technical levels, on infrastructure and systems, disclosure and governance practices, awareness-raising and spreading the culture of investment and in the diversification of investment tools and services provided to investors.
We are proud to say that in light of our strategic plan, QSE managed to bring about changes to its infrastructure, thus achieving the objective of transforming the QSE into a world-class exchange working in line with global best practice. Currently, securities lending and borrowing is allowed only for delivery versus payment (DVP) processing and liquidity provision. We are working with the regulators to further expand availability to professional investors, allowing them to gain additional income by lending their shares. This will also result in an increase in the market free float and provide additional trading opportunities for licensed investors.
With the introduction of Margin trading, investors will be given the opportunity to increase the size and scope of their portfolios without having to tie up more of their capital. This will also improve market liquidity. Our product diversification strategy is simple; list products that provide access to markets outside Qatar and allow easier access to a broader range of asset classes within Qatar.
World's Largest Sharia-Compliant ETF Planned
We are working towards launching a number of ETFs which will provide access to Emerging Market debt and equities. We are also planning the introduction of ETFs that will allow investors to invest in all of the components of the QSE 20 index with a single trade. Sharia-compliant products are also part of our product diversification strategy. We are currently working with a local asset manager to launch the largest Sharia-compliant ETF in the world. In addition to ETFs, we are also working with the regulators to list real estate investment funds (REITs) as we recognize that real estate is integral part of many investment portfolios in the region. These products will significantly add to the size of the market and allow us to attract new investors, further enhancing liquidity.
What are your main concerns about the current global economic, market and geopolitical situation?
The slowdown in China and the weak recovery in Europe and the United States impacted equity and commodity markets worldwide. The GCC financial markets have been impacted by low oil prices, the threat of US rate increases and more recently the devaluation of the Chinese yuan. However, the GCC markets may be nearing a zone of discomfort but are far from the danger zone.
Volatility – An Investment Opportunity
Generally, the volatility of any market is something heathy rather than something to fear about. Thus, the recent drop in the market may be viewed as an investment opportunity by some investors who want to buy when the stocks are cheap. That's why the market is a balanced relationship between sale and buy and between short-term investments and long-term investments.
What do you think should be the main themes, topics under discussion at the conference? As we endeavour to recognise the value of a stock market to a nation's economy, including here in the region. What should be noted by regulators, policy-makers and ordinary citizens is that, while a range of alternatives exist for many of the things exchanges do, how these markets are operated remains extremely important. Certain values, including transparency and fairness, are very valuable indeed.
By way of example, in 2011 the WFE initiated a strategic survey which identified top global priorities. These topics were grouped into five broad categories but the first concerned the core values of exchanges, and their role in society. This included a focus on the real economy (raising capital for issuers and providing investment opportunities for savers), rebuilding trust in the financial markets, and supporting developing markets standards and infrastructure.
This, the exchanges' role in supporting the real economy, is a natural topic for the WFE meeting.
One of the main themes is how to achieve sustainable development. To achieve sustainable development we require an action plan, one which is adopted by both governments and institutions, which focuses on meeting the needs of future generations without compromising those of our current generation.
I would like to focus on the importance of sustainable development for our institutions and businesses, but particularly those dimensions which relate to economic integration and cooperation, especially in view of the fact that all nation states and societies are exposed to the vagaries and vicissitudes of the global economy.
We are aware of and fully endorse these objectives and are keen to align ourselves with them at the earliest opportunity. The advantages of being able to leverage the collective experience of all these major exchanges are manifold and we wish to be an integral part of a movement which promotes sustainable capital markets and encourages sustainable investment principles.
This event is designed to provide a comprehensive and in-depth review of the most important issues facing our industry and your valuable participation offers a chance to see the pride we have in preserving our heritage while continuing our growth and success.
What message would you like attendees of the conference to go away with at the end of the day?
Today, our markets are faced with various challenges from this rapidly changing environment, but through the 55th General Assembly and Annual Meeting in Doha, I would like to not only share our interests and experiences, but also infuse our industry with the unique innovative and ambitious spirit of all of us working together to help it take off again.
Inclusive Growth – Key WFE Conference Theme
This event is about grasping these opportunities in building a future for this region and your regions by creating a framework for cooperation, innovation and sustainable development.
My friends, it is time for a new push, engaging all sectors, to create inclusive growth. This is the objective of Qatar Stock Exchange: Re-launching growth and investment while deepening reform and sustainable growth.
My friends, you can lead the way; by sharing know-how and insights and by working with international partners. Amid the difficult and demanding events experienced by most global stock markets, we hope that this event will provide a forum where key executives in global exchanges and capital markets can educate, discuss and forge solid strategic relationships.