Qatar Index at Highest Since September 2008 on Valuation Allure

Qatar’s benchmark stock index soared to the highest in more than four years on investor optimism the shares are catching up with its Gulf Cooperation Council peers as valuations are seen as increasingly attractive.

Barwa Real Estate Co., Qatar’s biggest publicly traded property developer by assets, climbed the most in 18 months. Oil and gas services company Gulf International Services QSC snapped a five-day losing streak and gained the most since May 30. Qatar’s QE Index advanced 0.5 percent to 9,335.21, the highest close since September 2008.

Shares on Qatar’s benchmark trade at an average price-to-book value of 1.67 times, compared with 1.99 for Saudi Arabia’s gauge. The index trades at less than 12 times earnings and at “a very strong” dividend yield of 5 percent, according to Bobby Sarkar, head of research at Qatar National Bank Financial Services.

“It’s a fundamentally attractive market in terms of valuation, and it has been one of the laggers in the GCC and is now catching up,” Sarkar said. “And you have some impact from the MSCI upgrade announcement that’s going to happen on the 11th of this month.”

Potential Upgrade

Qatar and the United Arab Emirates are under consideration for a possible reclassification at MSCI Inc. from their frontier-market rankings for the fifth year. HSBC Holdings Plc said Qatar could be upgraded, a move that could see more than $430 million flowing into the country.

The measure has rallied 12 percent this year, trailing a 50 percent gain for Dubai’s benchmark DFM General Index.

Qatar, where most companies limit overseas holdings to 25 percent, said on June 5 it’s making “extensive efforts” to raise foreign ownership limits of companies on its bourse, ahead of the MSCI’s decision on upgrading the nation to emerging market status. MSCI said last year the caps needed revising.

Shares in Barwa rose 5.2 percent, the biggest gain since December 2011, and were the most active on Qatar’s gauge with about 6.9 million shares traded. The company said on June 6 it was selling assets valued at 26 billion riyals ($7.1 billion) to shareholder Qatar Diar Real Estate Investment Co.

Gulf International Services increased 2.8 percent, the biggest jump since May 30, after the company said its unit won contracts valued at 1.7 billion riyals.

Elsewhere in the Middle East, Oman’s MSM30 Index added 0.8 percent. Saudi Arabia’s Tadawul All Share Index was little changed at the close in Riyadh. Dubai’s gauge lost 0.9 percent, and Abu Dhabi’s ADX General Index declined 0.3 percent. Bahrain’s gauge slid 0.5 percent, and Kuwait’s SE Weighted Index dropped 1.7 percent, trimming this year’s rally to 10 percent.

Egypt’s EGX 30 fell 2.9 percent, its sixth day of losses. Israel’s TA-25 Index rose 0.6 percent. The yield on the nation’s benchmark 4.25 percent bonds maturing in March 2023 increased four basis points, or 0.04 of a percentage point, to 3.78 percent.

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