Qatar Exchange appetites for more listings to deepen and broaden the market …

The Qatar Exchange, which now has 42 constituents, has appetite for more listings to deepen and broaden the market, but there is a need for proper pricing and to tackle the liquidity issues, according to financial experts.
“The ongoing initial public offer (of Mesaieed Petrochemicals Holding Company) is only the beginning. Now that Qatar Petroleum has taken the lead, confidence in the market is ought to improve,” an analyst with a brokerage house said.
The MPHC is one among the several maiden offers planned by QP in order to encourage long-term savings and investments among Qatari citizens.
Considering that the country has laid out mammoth capital expenditure for infrastructure upgrade ahead of 2022 World Cup and that several many big-ticket projects would also see the involvement of local companies, analysts said it would pave way for listings in order to raise capital from the market.
“Opportunity areas include those relating to utilities and infrastructure,” one of them said, adding “it makes sense as cost of equity is lower than the funds raised through other instruments.”
The country’s project market, which was rather dull in the previous year, is expected to pick up from this year, he added.
Highlighting that the sheer capital expenditure of the country itself is a reflection of the prospects in Qatar Inc, he said rather than waiting for the state-owned entities to come out with their IPO, many large family-owned entities should now come out of their risk-averse mould. By end-December 2013, total market capitalisation of the QE Index was QR555bn, equivalent to 76.3% of Qatar’s gross domestic product.
Highlighting that Qatar’s MSCI upgrade to ‘emerging’ market could lead to a robust foreign capital inflows, the analyst said such firms would naturally scout for those stocks that have a direct bearing on the economy, with the MPHC offer coming at the right time.
With MPHC’s offer, analysts are also of the view that Doha Global Investment, which should have come out with an IPO last year, might now have a rethink.
Many entities such as QInvest, Qatar First Bank and Barwa Bank have already announced their listing options, but no definite plan has been unveiled so far.
Acknowledging liquidity problems in the market, the sources said, “We have to be careful. If we suck the entire liquidity it will really create a problem for the exchange, so we have to balance.”
The tendency has been that whenever any company announces an IPO, or there are rumours regarding such offers, the secondary market gives way to primary market. It had happened on the Qatari bourse, but soon regained on account of dividend expectations, they said.
On the issue of pricing of maiden offers, analysts said a book-building route could gauge the right intrinsic price for the stock, rather than fixing and offering the shares at par value of QR10 a piece.
There is a need for a “fair” premium on the IPOs depending on the status and financial strength of the promoters, as is the case elsewhere, an expert said, adding a lack of book-building process was a deterrent.
However, they said in the days to come, when the market becomes more mature, it will ultimately reject arbitrary pricing and preferential allocation. Gulf Times

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