Qatar Stocks Retreat as Bank Cash Squeeze Adds to FTSE Pullback

  • QNB leads slump as gauge suffers worst rout since January
  • Central bank data shows July loans-to-deposits ratio worsened

Why Qatar Stocks Are Retreating

Qatar stocks declined the most in the world as tightening bank liquidity pushed financial stocks lower and some investors cashed in gains before an upgrade to emerging-market status with FTSE Russell.

The QE Index retreated 2.9 percent, the biggest drop since January and the most among more than 90 major gauges tracked by Bloomberg. FTSE will on Wednesday name the Qatari stocks to be included in its developing-nations gauge next month. The index had gained 14 percent this quarter in the build up to the switch.

“People buy on rumor and sell on news,” said Muhammad Shabbir, a Dubai-based independent analyst. “Once the FTSE index trade is over, we might see a further correction. Meanwhile, the banks were beneficiaries of the recent inflows into the market. Many people had commented that Qatari liquidity had improved, but if it’s again at 130 percent that’s a problem for the banking sector.”

The domestic loans-to-deposit ratio at banks worsened to 130.4 percent in July from 126.8 percent in June, according to monthly data from Qatar Central Bank.

The finances of Qatar, the world’s biggest producer of liquefied natural gas, have been strained amid a more than 25 percent slump in prices of the fuel in the past two years. A cash shortage in the banking system pushed the three-month interbank borrowing rate to a five-year high in June.

Qatar National Bank dropped 3.8 percent, the most since December. Masraf Al Rayan lost 2.4 percent, Commercial Bank of Qatar fell 5.4 percent and Qatar Islamic Bank slipped 2.1 percent.