Doha, Qatar – Qatar is gearing up for a FIFA World Cup fairness market increase because the nation’s inventory trade is all set to profit from the upcoming colossal occasion.
With greater than $4bn of international inflows within the first 10 months of this yr alone, fairness 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 anticipated to proceed alongside comparable traces within the yr after the match.
Traditionally, the common MSCI nation inventory market index of host nations of the earlier seven World Cups, excluding outlier Brazil, grew by 21.8 % within the yr main as much as the World Cup and by 13.4 % within the yr after, in contrast with the MSCI World Index common development of 4.3 % and 9.5 % respectively.
Brazil’s MSCI Index was an outlier and declined by 34 % within the yr after the ultimate match in 2014. That drop was on account of home financial circumstances, a political disaster and excessive inflation prevalent on the time, analysts say.
Nonetheless, 2022 is proving to be a rare yr as inventory markets bear the brunt of rate of interest hikes by central banks trying to struggle inflation and turning off the availability of simple cash that was began through 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 Inventory Trade (QSE), appreciated as a lot as 24.7 % 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 % yr up to now on September 5, 2022.
Whereas that will not appear to be loads, it nonetheless places the QSE Index as a relative outperformer amongst most main regional and international markets within the first eight months of this yr, as per the most recent knowledge accessible.
“Provided that the nation is getting ready for the World Cup for greater than a decade, to concentrate on a brief interval of inventory efficiency gained’t be a good reflection,” mentioned Akber Khan, senior director of asset administration at Doha-based Al Rayan Funding.
“If we have 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 %,” Khan added.
Throughout that interval, the broad index of rising market fairness is down greater than 20 %, whereas the worldwide fairness indices are up about 15 to 18 %, he identified.
‘Showcase a developed Qatar’
Since 2010, when Qatar gained 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 fuel services.
“That is actually pulling ahead numerous medium-term growth initiatives the state had and in lots of instances, numerous initiatives that will have been accomplished over a decade are already completed to indicate 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 yr as effectively, primarily from development, actual property, tourism and retail spending that trickles all the way down to the exchange-listed firms and the broader financial system as an entire.
“Particularly, Qatar’s goal is to make use of the occasion as a springboard to showcase its choices, and hopefully increase worldwide vacationer arrivals from 2.1 million in 2019 to six million per yr by 2030,” mentioned Saugata Sarkar, head of analysis at QNB Monetary Companies.
Qatari equities are already in an funding candy spot benefitting from distinctive tailwinds. Including to excessive oil and fuel costs, vital web international funding flows given Qatar’s standing as a protected haven, and internet hosting the upcoming World Cup, the nation has additionally undertaken an enlargement of its liquefied pure fuel (LNG) services that can practically double its fuel output, catapulting it to the pole place as a significant producer.
“We consider that these drivers may very well 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 international risk-off backdrop,” Sarkar mentioned.
“Whereas we can not rule out near-term volatility available in the market, we proceed to stay bullish longer-term on Qatari shares given their defensive traits backed by their sturdy fundamentals. Internet-net, we count on sturdy outcomes from Qatari firms in 2022 largely pushed by the FIFA World Cup,” he added.
The spoiler would be the battle in Ukraine, he cautioned, which is preserving Qatari and international indices risky.
Nonetheless, what works in Qatar’s favour because the world offers with the potential of a recession is the truth that the nation’s financial development is tied to its fuel manufacturing.
With new demand coming from Europe due to the Ukraine battle and the truth that Qatar is the “lowest-cost” producer, “it’s higher ready to soak up the unfavorable influence a recession might have on vitality costs,” mentioned Mohsin Mujtaba, director, product and growth, QSE. That may also be enticing to international buyers as they give the impression of being to rebalance their portfolios within the face of a worldwide slowdown, he added.
Lengthy-term impact
In line with regional fairness consultants, the initiatives initiated by the federal government of Qatar to host FIFA 2022 can have a long-term impact on listed firms throughout varied sectors.
BDSwiss MENA CEO Daniel Takieddine mentioned in an e-mail that, whereas the tons of of hundreds of holiday makers coming for the month-long soccer match can have an instantaneous impact, “extra lasting penalties on the financial system and monetary markets within the nation may very well be recorded. The extensively adopted occasion may draw consideration from people and firms 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 activities & Leisure, mentioned he appears to be like on the World Cup as “simply the beginning of a collection of large-scale occasions that can draw guests in giant numbers, boosting the tourism sector over the long run”, citing a Formulation 1 race and the 2023 Asia Cup that the nation will host subsequent yr.
Qatar 2022 CEO Nasser al-Khater expects that the FIFA World Cup will contribute $17bn to Qatar’s financial system through the occasion, down from an preliminary estimate of $20bn.
Whereas the first beneficiaries would be the hospitality trade, together with lodges, malls, retailers and retail, Al Rayan Funding’s Khan mentioned a number of listed small and mid-cap firms that gained authorities contracts as suppliers to bigger companies over the past a number of years will equally profit. These embrace companies that present paving stones and constructing supplies, in addition to house rental and safety providers, amongst others, he mentioned.