The indicative per unit value of exchange traded funds (ETFs), which will soon debut on the Qatar Stock Exchange (QSE), has been fixed at one-hundredth of the previous day’s close of the respective indices, it is learnt.
Multiple sources have confirmed the pricing of the ETFs, but said it was only an indicative price. Two ETFs – sponsored by Masraf Al Rayan and Doha Bank – are expected to be launched soon.
Indications are that Masraf Al Rayan sponsored-ETF would make its debut first, followed by the Doha Bank sponsored fund.
“Both the ETFs are ready from the regulatory point of view,” a source said.
The Masraf Al Rayan ETF, which will track the 17-stock Al Rayan Islamic index, will be managed by Al Rayan Investment Company, a subsidiary of the bank; while the Doha Bank ETF, following the 20-stock Qatar Index, have Amwal and Group Securities as fund manager and liquidity provider respectively.
ETFs provide investors with exposure to the index benchmark with a single trade and its pricing would be a function of the indices. For example, if ETFs were to be launched today, the unit price of Al Rayan ETF would be QR35.84 (the Al Rayan Islamic Index closed at 3,584.75.points yesterday and that of Doha Bank ETF would be QR96.79 (as the 20-stock Qatar Index closed at 9,679.92). On the pricing, the sources said the indicative (one-hundredth) pricing would appeal to investors and further movement would depend on the market makers. “They (market makers) will largely tend to keep the unit prices as close to the proportion,” one of them said, adding the pricing aspects would be clearly mentioned in the prospectus.
The proposed ETFs offer not only an expanded portfolio, but give investors a “viable” strategy to grow with the market at “considerably” lower costs.
The move to launch ETFs comes in view of an analysis of 300 individual portfolios undertaken by the QSE in which it found that the portfolios underperformed the index. Similarly, mutual funds, which often have higher management fees, were also seen underperforming the index.
With ETFs – which are mostly (but not exclusively) index-based, open-ended funds that can be bought and sold as quickly and easily as ordinary shares on a stock exchange – an investor can buy them at much lower size, which will also considerably reduce outgo towards brokerage commissions.
Otherwise, replicating the index means placing at least entering 17 or 20 orders (depending on the indices), making it difficult to ensure all such orders are executed at the right prices.
Both the ETFs would provide dividends with the Doha Bank ETF offering it in cash and the Al Rayan one reinvesting it.
The QSE’s first phase of saw reforms in the cash market with an aim to enhancing liquidity through the introduction of liquidity providers. The launch of ETFs forms a part of the phase.