Home > World Business
Saudi Gain Is A Loss For Qatar Reeling From $13 Billion Slump
Photographer: Yoan Valat/EPA
June 22nd, 2017 | 09:07 AM | 1091 views
SAUDI ARABIA
Add Saudi Arabia’s government changes to the reasons why investors should steer clear of Qatar.
The diplomatic standoff that’s erased $13 billion from Qatari stocks and pressured the country’s 16-year dollar peg isn’t likely to ease any time soon after Mohammed bin Salman was elevated to crown prince, making him first in line to the Saudi throne. Salman is seen as the main driver of the nation’s political and economic policies since his father became king in 2015, including the blockade of Qatar earlier this month.
While Saudi Arabia’s Tadawul All Share Index surged on Wednesday by the most in almost two years after the appointment, Qatar’s benchmark fell 1.8 percent to the lowest level since January 2016. At the same time, the nation’s currency extended a slide that left it at its weakest close in almost 30 years.
Qatar’s stock market lacks "good opportunities in the short-term," said Rami Sidani, Dubai-based head of frontier investments at Schroders Plc. It will "probably be pressured further because valuations remain elevated," he said.
The benchmark equities gauge sank into a bear market on June 6 after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic ties with Doha and imposed a travel blockade. The QE Index trades at 12.5 times forecast earnings of its members, among the most expensive in the Middle East, even as it’s poised to post the biggest quarterly loss in eight years.
Gulf investors have reduced their holdings of Qatari shares by more than $200 million, according to data compiled by Bloomberg. While the exodus has trimmed valuations, they’re still not low enough to tempt back buyers, according to the Middle East’s biggest publicly traded investment bank, EFG-Hermes Holding.
"The selloff hasn’t led to strong buying flows because the crisis has created an additional overhang on the market," said Simon Kitchen, an equity strategist at the Cairo-based company. "The current crisis means a higher cost of equity for Qatari stocks, and so lower target prices."
Analyst estimates for company earnings and share prices in Qatar, which is pouring billions of dollars into construction in preparation for hosting the 2022 soccer World Cup, have tumbled by about 15 percent each this year, according to data compiled by Bloomberg. That compares with an increase of at least 5 percent in both measures for Saudi shares.
Source:
courtesy of BLOOMBERG
by Ahmed A Namatalla
If you have any stories or news that you would like to share with the global online community, please feel free to share it with us by contacting us directly at [email protected]