(MENAFN- The Peninsula)
The Peninsula
Doha: An increased number of countries are now surging forward as the post-pandemic economy gains momentum, Chief Treasury & Investment Officer at Doha Bank, Gudni Stiholt Adalsteinsson has said.
“History offers us some guide on people’s behaviour post-crises events. It suggests that after a series of external disruptions like wars and pandemics, GDP bounces back relatively quickly. We have learned that people start spending again as the pent-up demand gets released into the economy. Even more interestingly crises force businesses to change, adapt and employ new innovations as companies move rapidly to deploy digital and automation solutions,” said Adalsteinsson.
He added:“In some cases, there is no going back to the old busines model. It has been argued that the coronavirus will dramatically accelerate ongoing shifts in the economy that were unfolding at a much slower pace before the crisis. Gigantic shifts from bricks-and-mortar retail to e-commerce happened promptly as shopping, education and even medical treatment went online not to mention remote working most of us have experienced. New trends emerged, some of which we’ve not yet fully understood like in which way business travel will resume and the role of restaurants shifting from dine-in to delivery experience. What we do know is that these changes are in many cases permanent”.
Adalsteinsson said that there is no doubt that the global economy is on the bend, though economic recovery will be uneven with every single industry and region emerging with leaders and laggards. The post-pandemic economy will be leaner than before.
“We can expect higher productivity and efficiency. But what can we expect to happen in Qatar and especially in the stock market? Is there anything special about our situation that would provide more exciting investment opportunities in Qatar than elsewhere? Let’s open up the history book again. Before reciting history lessons, a disclaimer and word of warning is required– the following is not an investment advice, please make your own judgment considering your capital can be at risk,” added Adalsteinsson in a commentary.
He went on to reiterate the World Cup impact. He said:“Hassan Al Thawadi, Secretary-General of the Supreme Committee for Delivery and Legacy, has disclosed that the contribution from the FIFA 2022 World Cup could be $20bn. That equates to more than 10 percent of the country’s GDP. With other global sportubf events like the summer Olympics barring foreign visitor and uncertainty around spectators’ role in the upcoming winter Olympics, one can expect additional built up interest for the FIFA event. World Cups are not only a great sporting event but can also be a significant boost to the economy and judging from history we can expect a positive impact on our stock market. Looking at the last four World Cups (Russia, Brazil, S-Africa and German) we learn that the stock markets in the host country rose between 6-18 percent in six months leading to the event. This might be something to consider”.
On the impact of oil price increases, Adalsteinsson noted that oil prices are up 50 percent this year. He added:“To put this into perspective, the Qatar state budget for 2021 assumed an average oil price of $40 per barrel in its revenue forecast. As the barrel is now trading around $73, the economic picture is looking much brighter. The case of rising oil prices remains strong with supply lagging behind increased demand. At the recent Qatar Economic Forum, leaders of key firms expressed their opinion that oil could even rise towards $100 per barrel – a daring forecast into what would be an unchartered territory but only time will tell if this scenario plays out. However, history tells us that local stock price performance and oil prices are highly correlated”.
But how does the Qatar stock market compare to others?
Adalsteinsson said:“Like with any positive news and trends, the first question is if the impact has already been priced into the equity market. One could argue that is not the case for Qatar. Since the beginning of the year, the Qatari stock market has risen slightly over 2 percent, which in itself is not a bad performance. However, the stock markets in our neighboring oil rich countries have risen on average 17 percent over the same period. Other metrics show a similar comparison. On the QSE, the average stock is trading around 18 times of their future annual earnings, which demonstrates the dynamic growth projections for the country. However, Qatari companies have not yet caught up with their peers in the neighboring countries, which on average trade on 25 times their future earnings. There are of course other factors to consider and performance is not just a mathematic formula. However there is a strong reason to believe the Qatari market is set for an improvement”.
And, how can investors gain access to the Qatari market and the market opportunity?
Adalsteinsson added there are multiple ways for investors to get exposure to the Qatar stock market, including two Exchange Traded funds, one of which is the Qatar Exchanged Traded Fund (QETF).
“The investment strategy allows the investor community to gain access to the most liquid stock in Qatar as the fund seeks to replicate the investment outcome of the Qatar Stock Exchange price index, through investing in the underlying constituents based on their individual index weights. The QETF will distribute accumulated dividends annually, gained from its investment portfolio, net of fees, which for 2020 amounted to QR0.29 per unit. Since inception, the QETF has a price return of 17.53 percent and including dividends a total return of 37.60 percent,” Adalsteinsson added.
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