Qatari equity market has enjoyed a better-than-expected oil price-driven rally. The market posted a strong 20 percent re-rating in the run-up to the first tranche of its FTSE upgrade in September 2016 with a peak registering on the date of implementation. A similar re-rating is underway presently, with a peak likely to occur at or before the upgrade date of the second tranche in March 2017, Credit Suisse noted in its research alert on Middle East Equities yesterday.
However, Credit Suisse keep its underweight stands on Qatari equity, as the market is likely to see a correction once its upgrade to FTSE Secondary Emerging Market status is completed in March.
Qatari bourse benchmark index shed 0.96 percent or 105.06 points to finish at 10.884.70 yesterday. The market is up by 4.29 percent on year-to-date.
“Beyond the March implementation date, we continue to house concerns over Qatar’s valuations and overall growth outlook.
On a P/E basis, Qatar is only moderately expensive and trades slightly above its long-term average. But on a dividend yield basis, Qatar has moved from consistently being the highest yielding market to the middle of the pack, in a Middle East context. This is important, as Qatar’s dividend yield has historically provided important support for the market – up until mid-2016, it provided an average 140 bp greater yield than its larger GCC peers”, Credi Suisse’s research note said.
According to the analysts, the Middle East markets have enjoyed an impressive rally, with the region gaining 17 percent in Q4 2016. This was by far the strongest performance by any region and allowed the Middle East to post a modestly positive return for 2016 overall.
The key driver for this was the strong recovery in both risk appetite and oil prices, particularly after the unexpected Opec deal.
Meanwhile, a separate research note on ‘GCC stock and debt market outlook’ issued by ‘Markaz’ yesterday said stock valuation levels in the region in 2016 have drifted away from the fundamental values.
For instance, price-to-earnings multiple for Saudi Arabia currently stands at 17.5x followed by Kuwait at 17.1x, and, in comparison with other major GCC market such as UAE (P/E 12.2x) and Qatar (P/E 13.5x) they are trading at a premium.
