31 January 2016
Satish Kanady - The Peninsula

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DOHA: The London-listed Qatar Investment Fund (QIF) noted that Qatari market selloff was overdone and the fund remains optimistic on Qatar over the medium term to longer term.

The Qatar-focused fund said it continues to remain overweight on the Qatari banking sector, including financial services at 43.2 percent of its net asset value (NAV) compared to the Qatar Exchange (QE) banking sector weighting of 40.5 percent.

Industrials sector remain QIF’s second largest exposure at 28.0 percent in Q4, 2015 compared to 24.6 percent in the previous quarter. The QIF reduced exposure to Industries Qatar, while increasing exposure in Gulf International Services, as the latter stock fell 20.8 percent during the Q4 and valuations started looking attractive.

QIF also increased exposure to Qatar Electricity & Water Company, QIF’s quarterly investment report said.

QIF’s weighting in the real estate sector increased from 6.6 percent in Q3 to 9.0 percent in Q4. Exposure to the telecom sector increased to 4.7 percent, following substantial improvement in Ooredoo’s financial performance in Q3.

QIF added exposure to the insurance sector with a 5.1 percent weighting in Qatar Insurance Company (QIC), as valuations started looking attractive. Further, QIF marginally reduced exposure to transportation and consumer goods and services sector.

The Fund’s quarterly investment report noted that Qatari market showed resilience in Q4, compared other GCC markets . In the 18 months to December 31, 2015, Qatar fell 9.2 percent and was the second best performer after Abu Dhabi , which was down 5.4 percent.

QIF’s Investment adviser believes the Qatar market selloff is overdone and remains optimistic on Qatar over the medium to longer term because of its superior growth prospects and an expanding non-hydrocarbon sector.

“The liquidity concerns in the Qatari banking system are likely to continue in the near term. However, Qatari banks are expected to slowly overcome these by issuing bonds and as public sector deposits coming back to Qatari banks. The Investment Adviser reassessed valuations in the banking sector and performed its own stress testing on banking models and found that despite liquidity concerns, banking sector valuations appear attractive the report noted.

QIF’s NAV per share net of dividends fell 14.6 percent in 2015 while Qatar Exchange Index fell 15.1 percent. QIF’s NAV before dividends decreased by 7.7 percent in Q4, 2015, while QE was down 9.0 percent. As at December 31, 2015, QIF shares traded at a 12.7 percent discount to NAV .

QIF’ report noted that Qatar is well positioned to continue to grow as macroeconomic fundamentals remain healthy.

The 2016 budget maintains spending on major projects showing the commitment of Qatari government to implement its sustainable development programme.

The Qatari equities have already priced in excessive pessimism and relative valuations remain attractive. In addition, the Qatari market is trading at a discount to its historical average.

The QE Index is currently trading at a trailing twelve months P/E ratio of 10.79x as at December 31 2015 vs. its 10-year historical average of 12.63x, a discount of 14.5 percent, thus providing a good entry point to investors.