Doha, Qatar – Qatar is gearing up for a FIFA World Cup equity market boom as the country’s stock exchange is poised to benefit from the upcoming colossal event.
With more than $4bn of foreign inflows in the first 10 months of this year alone, stock market experts say Qatar’s stock market, like most previous World Cup host markets, has outperformed its peers in the run-up to the mega-contest and is expected. to continue along similar lines in the year after the tournament.
Historically, the average MSCI stock market index of the host countries of the previous seven World Cups, excluding the outlier Brazil, grew by 21.8 percent in the year leading up to the World Cup and by 13.4 percent in the year after, compared to the MSCI World . The average growth index was 4.3 percent and 9.5 percent respectively.
The MSCI Brazil index was an outlier and fell by 34 percent in the year after the final match in 2014. That drop was on account of the domestic economic situation, political crisis and high inflation prevalent at that time, analysts say.
However, 2022 is proving to be an extraordinary year as the stock market bears the brunt of interest rate hikes by central banks that are trying to fight inflation and shut down the supply of easy money that started during the pandemic. Qatar’s stock market is not immune either.
The QSE index, which measures the 20 largest and most liquid stocks on the Qatar Stock Exchange (QSE), appreciated as much as 24.7 percent from the beginning of 2022 to April 11, 2022, but then declined to almost flat territory at the end of June and rose again by 12.1 percent a year to September 5, 2022.
While that may not seem like much, it still places the QSE Index as a relative outperformer among most major regional and global markets in the first eight months of this year, according to the latest available data.
“Given that the country is preparing for the World Cup for more than a decade, focusing on the short period of stock performance will not be a fair reflection,” said Akber Khan, senior director of asset management in Doha-based Al Rayan. Investment.
“If we look at the performance of Qatar’s stock market in the last five years, when preparations related to the World Cup accelerated in terms of work speed, Qatar’s stock market rose by more than 50 percent,” added Khan.
During that period, the broad index of emerging market equity fell more than 20 percent, while the global equity index rose about 15 to 18 percent, he pointed out.
‘Showcase a progressive Qatar’
Since 2010, when Qatar won the right to host the World Cup, the country has spent more than $300bn to improve its infrastructure, including the Doha Metro, thousands of kilometers of local roads and highways, new ports, new airports, and even new cities. also boosting its oil and gas facilities.
“This really pulls forward many medium-term development projects that the country has and in many cases, many projects that have been completed for a decade have been completed to show Qatar progressing during the World Cup,” Khan. added.
The World Cup benefit on the QSE is expected to be well implemented next year, mainly from construction, real estate, tourism and retail spending which is down to listed companies and the economy in general.
“In particular, Qatar’s goal is to use the event as a springboard to showcase its offerings, and hopefully boost international tourist arrivals from 2.1 million in 2019 to 6 million per year by 2030,” said Saugata Sarkar, head of research at QNB Financial Services.
Qatari equities have been in an investment niche that has benefited from unique tailwinds. Adding to the high oil and gas prices, significant net foreign investment inflows given Qatar’s status as a safe haven, and the upcoming World Cup host, the country has also undertaken an expansion of its liquefied natural gas (LNG) facilities that has almost doubled the gas output, catapulting to the pole position as the main producer.
“We believe that these drivers can be largely priced into the market, but we must provide the QSE Index with a high quality catalyst that helps grow or stabilize the market despite the overall prevalent global risk-off backdrop,” said Sarkar.
“Although we cannot rule out near-term volatility in the market, we remain long-term bullish on Qatari stocks given their defensive characteristics supported by strong fundamentals. Net-net, we expect strong results from Qatari companies in 2022 which is driven by the FIFA World Cup,” he added.
The spoiler will be the war in Ukraine, he cautioned, which protects the Qatari and volatile global index.
However, what works in Qatar’s favor as the world deals with the possibility of recession is the fact that the country’s economic growth is tied to its gas production.
With the new demand from Europe due to the war in Ukraine and the fact that Qatar is the “lowest price” producer, “it is better to be prepared to absorb the negative impact of the recession on energy prices,” said Mohsin Mujtaba, director. product and development, QSE. It will also be attractive to foreign investors when they look to rebalance their portfolios in the face of a global slowdown, he added.
According to regional equity experts, the projects initiated by the Qatari government to host FIFA 2022 will have a long-term effect on listed companies in various sectors.
BDSwiss MENA CEO Daniel Takieddine said in an email that, although the hundreds of thousands of visitors who come for the football tournament during the month will have an immediate effect, “more lasting consequences on the economy and financial markets in the country can be noted. The widely followed event can attract attention from individuals and companies to Qatar as a tourism destination and investment destination that increases capital flows.
Oliver Kent, managing director at Dubai-based ZK Sports & Entertainment, said he sees the World Cup as “just the beginning of a series of large-scale events that will attract visitors in large numbers, improving the tourism sector in the long term.”, mentioning the Formula race. 1 and the 2023 Asian Cup which will be hosted next year.
Qatar 2022 CEO Nasser al-Khater expects that the FIFA World Cup will contribute $17 billion to Qatar’s economy during the event, down from an initial estimate of $20 billion.
Although the main beneficiary will be the hospitality industry, including hotels, malls, shops and retail, Al Rayan Investment’s Khan said several small and mid-cap listed companies that won government contracts as suppliers to large firms in the past few years will also benefit. These include companies that supply paving stones and building materials, as well as apartment rentals and security services, among others, he said.