Qatar Exchange (QE) roundup again …

The Qatar Exchange opened the week on a stronger note and its key index settled above the 10,500 level, triggered by buying interests from foreign institutions.

Industrials, telecom and transport stocks witnessed above-average gains, leading the 20-stock Qatar Index (based on price data) appreciate for the second consecutive day by 0.39% to 10,526.95 points.

The key index has been remaining above the 10,000 mark for the 25th consecutive day.

Although the index that tracks Shariah-compliant stocks was on the rise, it underperformed other key barometers.

However, local retail investors were seen squaring off their positions in the market, which is up 25.94% year-to-date.

Overall market liquidity was on the higher side on more-than-tripled trading volumes in the industrials and transport counters.

More than 61% of the stocks extended gains with influential movers being Industries Qatar, Qatari Investors Group, Gulf International Services, Vodafone Qatar, Nakilat, Qatar Islamic Bank and Commercial Bank, even as QNB and Mazaya Qatar bucked the trend.

The 20-stock Total Return Index rose 0.39% to 15,040.6 points, the All Share Index (with wider constituents) by 0.36% to 2,619.62 and the Al Rayan Islamic Index by 0.32% to 3,087.26.

All the three indices factored in dividend income as well.

Industrials stocks gained 0.93%, followed by telecom (0.56%), transport (0.45%), banks and financial services (0.12%) and consumer goods (0.07%), whereas insurance and real estate fell 0.3% and 0.01% respectively.

Market capitalisation rose 0.32%, or about QR2bn, to QR561.27bn.

Foreign institutions’ net buying amounted to QR47.68mn compared to QR4.41mn last Thursday.

Non-Qatari individuals were net buyers to the tune of QR1.01mn against net sellers of QR1.11mn the previous trading day.

Qatari individual investors were net sellers to the extent of QR27.58mn compared to net buyers of QR1.85mn last Thursday.

Domestic institutions’ net selling rose to QR21.07mn against QR5.12mn the previous trading day.

Total trading volume was up 3% to 10.29mn stocks, value by 36% to QR387.96mn and transactions by 38% to 5,615.

The industrials sector’s trading volume more than quadrupled to 1.84mn shares and value also more than quadrupled to QR121.25mn on more than doubled deals to 1,813.

The transport sector witnessed its trading volume quadruple to 1.44mn equities and value more than triple to QR33.35mn on more than doubled transactions to 356.

The banks and financial services sector reported 72% surge in trading volume to 2.11mn stocks, 40% in value to QR105.7mn and 50% in deals to 1,643.

The real estate sector’s trading volume rose 7% to 3.18mn stocks, value by 3% to QR72.87mn and transactions by 23% to 1,021.

However, the telecom sector’s trading volume plummeted 77% to 0.88mn shares, value by 65% to QR15.67mn and deals by 40% to 293.

The insurance sector saw its trading volume plunge 33% to 0.02mn equities and value by 27% to QR1.22mn but on more than doubled transactions to 37.

The consumer goods sector’s trading volume tanked 30% to 0.81mn stocks, value by 287% to QR37.9mn and deals by 38% to 452.

In the debt market, there was no trading of treasury bills. However, a total of 7,500 bonds valued at QR75.08mn changed hands across two transactions. Gulf Times

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Last week, I noted that the strong performance of Qatar Exchange witnessed during the second half of this year may not continue  with the same force in 2014 as the factors caused these achievements were temporary, or with temporary stimulating nature in most cases. For a sustainable growth, the QE requires a review of different factors, including the terms and conditions led to lack of issuing licences for new companies within the past four years, and not introducing new products other than shares and permissions that traded exclusively on the banks only.

Fortunately, this article coincides with the announcement made by Qatar Central Bank for the strategy of the watchdog of the development of the financial sector, with the operational plan for the period of 2014-2016. The strategy emphasised that a strong financial sector  contributes to job creation, encourage investment in the economic environment characterised by variety and competition and achievement of these require to achieve six goals, including strengthening of monitoring system through by developing a framework for overall precaution based on risks, expansion of the overall prudential supervision and to promote oversight cooperation.

This means that the above-mentioned strategy seeks to unify the principles and criteria of control over the various actors in the financial sector, while retaining the supervision and control of all three bodies over their members. This may lead to the fact that the current situation of the Qatar financial market may remain as it is for the near future, without substantial changes on the factors I mentioned in the previous article.

The question that could rise in this context about the reason behind the structural rigidities of the financial market, as the Arabic daily of Al Sharq published last week entitled: “The lack of companies inclusion: as the premier event of the QE in 2013.” Since the licensing process, however, is under Qatar Financial Market Authority, the question on the delay of listing new companies could be directed to it, to provide the public with clear answers about its plans in this area.

I asked this question to some officials in the investment institutions to get their opinion regarding this issue and the reason for not activating the law of investment units, as long as the Qatar Securities Company  had approved the law and published it on its website.  At the beginning, I thought that these authorities are not willing or not interested in this issue, but surprisingly I just found the opposite.  Many entities had applied to get a licence from the authority, but they did not get the required approval despite waiting for a long time to get a response.

The problem with the law on establishing investment units and their inclusion is that the law gives the right to the authority to reject applications submitted for licence without explaining the reasons for rejecting. Such a provision in the law makes applications hanging for long periods, and it causes frustration among investors, as the terms or their proposals do not get amended or developed to commensurate with the requirements of the authority.

It can be concluded that the real problem that facing the development of Qatari financial market is authorising Qatar Financial Markets Authority with combined powers of licensing, and the power of supervision and inspection over the work of companies listed at Qatar Exchange. This makes the inspector usually suspicious over the performances of the bodies who are under his monitoring, and this in turn discourage him or weakens his ability to issue licences for new companies. Monitoring and inspecting make the authority prefer to make applications subject to further study and scrutiny and this lead to take a longer time. Whenever research and study period has been prolonged, there are new factors emerging with the time and this may lead to further delays.

It may be an appropriate solution to consider the separation of powers of issuing licences for all financial institutions, including banks, insurances and investments, financing and brokerage, by make it under one independent body, which is run by board of directors of the three authorities. This may accelerate the licensing processes for financial institutions in order to achieve the ultimate goal of the strategy referred to above, which include creating jobs and encouraging investment.  In line with the directives of H H the Emir; in his speech at the opening of Advisory Council sessions, when ordered for activating the role of the private sector and reduce barriers that hindering the private sector from playing his role and contribute effectively to the development of Qatar. The Peninsula

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