Al-Mansoori: Endorsement of Qatari market’s progress.

Qatar will be removed from the frontier index in September 2016


Global index provider FTSE Russell has upgraded Qatar to ‘secondary’ emerging market from the previous ‘frontier’ status as the market met many of the criteria required to attain the ‘secondary’ status.
In September 2013, Qatar was added to a FTSE ‘Watch List’ for possible promotion and then in March this year the index provider cited Qatar as having passed its key liquidity criteria for the secondary emerging market inclusion.
Equity markets in FTSE Global Equity Index Series (GEIS) fall into one of four categories: developed, advanced emerging, secondary emerging and frontier.
“Qatar will be promoted from frontier to secondary emerging since this market now meets the criteria required to attain secondary emerging market status,” according to Chris Woods, chairman of FTSE Russell.
Qatar will be removed from the frontier index in September 2016. In recognition of the potential liquidity demands arising from its promotion, Qatar’s inclusion as a secondary emerging market status will be effected in two tranches.
The first tranche of 50% will be implemented in conjunction with the semi-annual review of FTSE GEIS in September 2016 and the second 50% tranche will be implemented in conjunction with the March 2017 semi-annual review, FTSE spokesman said.
The Qatar Stock Exchange, with 43 listed companies and capitalisation of more than QR613bn (as on September 13, 2015), has investment grade creditworthiness, according to FTSE Russell, which is a London Stock Exchange group company whose expertise and products are used extensively by institutional and retail investors globally.
“It is yet again an endorsement by international investment community of the progress the Qatari market has made in recent years. We welcome the entire investment community that is benchmarked to the FTSE indices,” QSE chief executive Rashid bin Ali al-Mansoori said.
The upgrade comes six months after al-Mansoori had expressed his optimism about a possible promotion to higher tier.
Earlier, MSCI as well as Standard & Poor’s-Dow Jones had upgraded the QSE to ‘emerging’ market from ‘frontier’ status. After the upgrade, the average daily turnover had increased 160% in 2014 compared to 2013, al-Mansoori said, adding the average daily trading volume jumped from QR300mn during the last ten years to QR900mn as average daily trading during 2014. “One of the days, we even touched QR4bn when emerging market classification was effected,” he had said.
The FTSE’s measure of quality of (Middle East) markets has broadly laid out five criteria including market and regulatory environment, custody and settlement, dealing landscape, derivatives, and size of the market.
Under the market and regulatory environment criteria, Qatar has passed conditions pertaining to formal market regulatory authorities and repatriation of capital and income, even as it has not met those relating to fair and non-prejudicial treatment of minority shareholders and free and well developed foreign exchange market. Moreover, it was found to have restricted foreign ownership and equity market as well as restricted registration process for foreign investors.
Under custody and settlement, FTSE said, Qatar, which follows T+3 cycle, does not have sufficient competition in custodian services, stock lending, and omnibus account facilities available to global investors.