Qatar’s near-to-medium term projects will focus on delivering core infrastructure even as the country is expected to spend $115bn on infrastructure in the run-up to staging FIFA World Cup 2022, Standard Chartered has said in a report.
“Sport-related infrastructure is more likely to begin midway through Qatar’s decade-long spending cycle. In this quarter so far, we have seen positive signs related to Qatar’s spending commitments for FIFA 2022. In addition, so far this year the government has awarded a number of projects related to the country’s decade-long infrastructure commitments,” StanChart said.
Some of these projects should break ground by the second half of this year, the report said.
“Between now and 2022 we expect almost $115bn of government expenditure on infrastructure projects and FIFA 2022. It is important to note the lag between project award and execution, with the latter being more relevant to real GDP growth. Infrastructure projects have a head start.
“Earlier this year the government put out to tender a number of transport (roads) and sewerage development projects as part of its $20bn roads and sewerage programme for the next five years.”
Qatar, StanChart said, is moving towards a phase of non-hydrocarbon driven growth. The key driver of the national economy will be the non-hydrocarbon sector.
StanChart said it remains “constructive” on the Qatari credit space.
The sovereign’s financial metrics remain robust, although external and public-sector indebtedness have increased in recent years. The sovereign curve remains the most liquid means to gain exposure to Qatar across various maturities. While absolute spreads are still attractive for the AA rated category, relative spread differentials between Qatar and other emerging market (EM) sovereign bonds have compressed significantly, the report said.
In the corporate space, Ooredoo successfully issued $1bn of bonds in January 2013, including its first 30Y bond.
“While we continue to like the credit, we are mindful of a renewed push towards acquisitions and the possibility of debt-funding leading to deterioration in credit metrics (S&P recently revised the company’s credit outlook to negative).
“We have a slight preference for banks over corporates/quasi-sovereigns in both Qatar and Abu Dhabi at the 5Y part of the curve.
Although banks’ performances in both countries in 2012 were broadly in line with the performance of quasi-sovereigns, their fundamentals are robust and they still offer a slight spread pick-up over quasi-sovereigns.
“We like Qatari banks, followed closely by Abu Dhabi banks,” StanChart said.
First, Qatar remains the fastest-growing economy in the region. Second, from a fundamentals point of view, currently Qatari banks have the strongest balance sheets in terms of asset quality and capital adequacy. Third, from a valuation point of view, Qatari banks underperformed Abu Dhabi lenders last year and are, on average, slightly more attractive than comparable Abu Dhabi names. Finally, there is a risk of above-average supply from Abu Dhabi banks in 2013 if they decide to replace their Ministry of Finance Tier 2 debt with cheaper debt from the markets, StanChart said.
However, StanChart said it is mindful that there might be increased debt issuance by Qatari banks in order to fund the infrastructure-building requirements related to the FIFA 2022 World Cup, some Qatari banks are growing rapidly, potentially storing up problems further out, and there is higher merger and acquisition risk, as Qatari banks appear to be interested in overseas acquisitions.
Source: Caye Global News, Gulf Times
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