Doha, Qatar – Qatar is gearing up for a FIFA World Cup equity market boom because the nation’s inventory change is all set to learn from the upcoming colossal occasion.
With greater than $4bn of international inflows within the first 10 months of this 12 months alone, equity market consultants say that Qatar’s inventory market, like most earlier World Cup host markets, has outperformed friends within the run-up to the mega contest and is predicted to proceed alongside related strains within the 12 months after the event.
Historically, the typical MSCI nation inventory market index of host nations of the earlier seven World Cups, excluding outlier Brazil, grew by 21.8 p.c within the 12 months main up to the World Cup and by 13.4 p.c within the 12 months after, in contrast with the MSCI World Index common progress of 4.3 p.c and 9.5 p.c respectively.
Brazil’s MSCI Index was an outlier and declined by 34 p.c in the year after the final match in 2014. That drop was on account of home financial circumstances, a political disaster and excessive inflation prevalent on the time, analysts say.
However, 2022 is proving to be a unprecedented 12 months as inventory markets bear the brunt of interest rate hikes by central banks trying to combat inflation and turning off the provision of easy money that was started during the pandemic. Qatar’s inventory market has not been proof against both.
The QSE Index, which measures the 20 largest and most liquid shares on the Qatar Stock Exchange (QSE), appreciated as a lot as 24.7 p.c from the beginning of 2022 to April 11, 2022, however then declined to nearly flattish territory in late June and was once more up by 12.1 p.c 12 months so far on September 5, 2022.
While that will not seem to be rather a lot, it nonetheless places the QSE Index as a relative outperformer amongst most main regional and world markets within the first eight months of this 12 months, as per the most recent information accessible.
“Given that the nation is getting ready for the World Cup for greater than a decade, to give attention to a brief interval of inventory efficiency received’t be a good reflection,” stated Akber Khan, senior director of asset administration at Doha-based Al Rayan Investment.
“If we take a look at the efficiency of Qatar’s inventory market within the final 5 years, when preparations associated to the World Cup accelerated by way of the tempo of labor, Qatar’s inventory market is up greater than 50 p.c,” Khan added.
During that interval, the broad index of rising market equity is down greater than 20 p.c, whereas the worldwide equity indices are up about 15 to 18 p.c, he identified.
‘Show off a developed Qatar’
Since 2010, when Qatar received the rights to host the World Cup, the state has spent greater than $300bn to improve its infrastructure, together with the Doha Metro, hundreds of kilometres of native roads and highways, a brand new port, a brand new airport, and even a brand new metropolis, in addition to boosting its oil and gasoline services.
“This is absolutely pulling ahead loads of medium-term growth initiatives the state had and in lots of instances, loads of initiatives that may have been accomplished over a decade are already completed to point out off a developed Qatar through the World Cup,” Khan added.
The World Cup beneficial properties on the QSE are anticipated to hold into the subsequent 12 months as effectively, primarily from development, actual property, tourism and retail spending that trickles right down to the exchange-listed firms and the broader economic system as an entire.
“Specifically, Qatar’s goal is to make use of the occasion as a springboard to showcase its choices, and hopefully enhance worldwide vacationer arrivals from 2.1 million in 2019 to six million per 12 months by 2030,” stated Saugata Sarkar, head of analysis at QNB Financial Services.
Qatari equities are already in an funding candy spot benefitting from distinctive tailwinds. Adding to excessive oil and gasoline costs, vital web international funding flows given Qatar’s standing as a secure haven, and internet hosting the upcoming World Cup, the nation has additionally undertaken an growth of its liquefied pure gasoline (LNG) services that may almost double its gasoline output, catapulting it to the pole place as a serious producer.
“We consider that these drivers could possibly be largely priced into the market, however ought to present the QSE Index with high-quality catalysts that assist develop or stabilise the market regardless of the general prevalent world risk-off backdrop,” Sarkar stated.
“While we can’t rule out near-term volatility within the market, we proceed to stay bullish longer-term on Qatari shares given their defensive traits backed by their robust fundamentals. Net-net, we anticipate robust outcomes from Qatari firms in 2022 largely pushed by the FIFA World Cup,” he added.
The spoiler would be the warfare in Ukraine, he cautioned, which is maintaining Qatari and world indices unstable.
However, what works in Qatar’s favour because the world offers with the opportunity of a recession is the truth that the nation’s financial progress is tied to its gasoline manufacturing.
With new demand coming from Europe due to the Ukraine warfare and the truth that Qatar is the “lowest-cost” producer, “it’s higher ready to soak up the detrimental affect a recession might have on power costs,” stated Mohsin Mujtaba, director, product and growth, QSE. That may also be engaging to international buyers as they give the impression of being to rebalance their portfolios within the face of a worldwide slowdown, he added.
Long-term impact
According to regional equity consultants, the initiatives initiated by the federal government of Qatar to host FIFA 2022 could have a long-term impact on listed firms throughout varied sectors.
BDSwiss MENA CEO Daniel Takieddine stated in an electronic mail that, whereas the tons of of hundreds of tourists coming for the month-long soccer event could have a direct impact, “extra lasting penalties on the economic system and monetary markets within the nation could possibly be recorded. The extensively adopted occasion may draw consideration from people and corporations alike to Qatar as a tourism spot and as an funding vacation spot boosting inflows of capital.”
Oliver Kent, managing director at Dubai-based ZK Sports & Entertainment, stated he seems on the World Cup as “simply the beginning of a sequence of large-scale occasions that may draw guests in giant numbers, boosting the tourism sector over the long term”, citing a Formula 1 race and the 2023 Asia Cup that the nation will host subsequent 12 months.
Qatar 2022 CEO Nasser al-Khater expects that the FIFA World Cup will contribute $17bn to Qatar’s economic system through the occasion, down from an preliminary estimate of $20bn.
While the first beneficiaries would be the hospitality business, together with resorts, malls, outlets and retail, Al Rayan Investment’s Khan stated a number of listed small and mid-cap firms that received authorities contracts as suppliers to bigger companies during the last a number of years will equally profit. These embrace companies that present paving stones and constructing supplies, in addition to condominium rental and safety providers, amongst others, he stated.