FIFA Rattles Qatari Sukuk Mired in Worst Month This Year

Prospects for the 2022 World Cup in Qatar are unsettling bond investors already rattled by political turmoil between the country and its neighbors, with its sukuk on course for its worst month in more than a year.

The yield on Qatar’s Islamic notes due January 2018 rose 19 basis points in September, on course for the biggest monthly increase since August 2013, according to data compiled by Bloomberg. The average yield for Middle East Shariah-compliant securities jumped 12 basis points in the period, JPMorgan Chase & Co. indexes show.

FIFA Executive Committee member Theo Zwanziger told Germany’s Bild this week that Qatar probably won’t host the world’s biggest soccer event in 2022 because of the summer heat. While Qatar dismissed his comments, it’s creating more market turbulence for the country, which has been at odds with Saudi Arabia and the United Arab Emirates over its support for the Muslim Brotherhood in the region.

“The political differences with its neighbors combined with uncertainty over the World Cup is affecting sentiment,” Thomas Christie, head of fixed income at Prometheus Capital Finance Ltd., said by phone from Dubai yesterday. “The bond will drop further if its neighbors continue to isolate Qatar and this FIFA situation isn’t resolved.”

Personal Remarks

Delia Fischer, a spokeswoman for Zurich-based FIFA, soccer’s global governing body, said “these were personal remarks made in his personal capacity and not as a FIFA representative.” A panel will meet next month and in February to discuss the scheduling of the event, not moving it to another country, she said.

Qatar in 2010 won the right to host the tournament during its summer and after the end of most major European leagues. The world’s biggest liquefied natural gas producer reiterated a promise to use technology to cool stadiums in a statement yesterday, as temperatures can reach 50 degrees Celsius (122 degrees Fahrenheit). In the run-up to the event, Qatar is spending $200 billion on roads, stadiums, a rail network and a new city.

“There’s a lot riding on this,” Montasser Khelifi, a senior manager for global markets at Quantum Investment Bank Ltd. in Dubai, said by phone yesterday. “The potential for economic growth outside of the hydrocarbon industry is linked to the World Cup.”

Negative News

Qatar’s World Cup woes coincide with the nation being isolated for its foreign policies toward political Islamists. Saudi Arabia and the United Arab Emirates have accused Qatar of threatening the region’s stability because of its support for the Muslim Brotherhood. Together with Bahrain they withdrew their ambassadors in March.

A Qatari diplomat denied Sept. 13 comments on Twitter by an official from the Egyptian section of the Brotherhood that Qatar had asked members of the Islamist group to leave the country. The diplomat said they were leaving on their own accord.

“It’s mostly negative news flow that’s affecting the sukuk,” Khelifi said. “The country’s fundamentals are still very strong.”

While Qatar’s economic growth will probably slow to 6 percent this year, according to the median estimate of 11 economists surveyed by Bloomberg, its higher than the 4.4 percent estimated for Saudi Arabia and 4.45 percent for the U.A.E., the Arab world’s two biggest economies. The nation’s benchmark stock index climbed to a record on Sept. 18.

“There’s no question that Qatar will repay the debt,” Christie said. “What it’s dealing with is a political issue and a series of public relations problems. These need to be resolved.”

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