Manama: Qatar may ease the foreign investment limit for listed companies as the country's bourse is set to be linked to global stock markets.
"Eventually, it will have to happen. The government is aware of the issue and I believe discussions are going in the right direction," an industry source told the Qatari daily Gulf Times.
Currently, the foreign investment limit is 25 per cent, but the corporate sector has been asking the government to ease this to help them attract much needed capital and to enhance liquidity.
Yusuf Husain Kamal, the finance minister, last year said that several listed companies, including financial institutions, wanted to increase foreign shareholding limits to 49 per cent.
In April 2005, the government allowed foreign investors to participate in all the listed companies, including the banking sector, on the Qatar Exchange (QE).
The government could give blanket approval to the foreign investment hike, but it is for the respective boards of the listed companies to decide on the extent of foreign ownership, depending on the needs and vibrancy in the domestic economy, the source said.
"Growing market capitalisation, along with relaxation of foreign investment limits, could attract foreign investment banks into the market," a financial analyst said.
Highlighting the fact that Qatar has managed to put in place the right infrastructure for the capital market with the QE migrating to the time-tested Universal Trading Platform, the unnamed source quoted by the newspaper said establishing proper support structures, especially for foreign investors, would have to follow in the subsequent phases of the five-year strategy.
Worldwide network
QE chief executive Andre Went recently said the bourse would be connected to the Secure Financial Transaction Infrastructure (SFTI), a worldwide network that connects banks and brokers across the world to stock exchanges in Europe and the US.
The move should theoretically attract foreign investors, but more needs to be done, an analyst said.
"Establishing a link with global bourses per se will not mean higher liquidity unless it is accompanied by certain changes in legislation to create an enabling environment," the source said.
MSCI, the body responsible for reviewing all bourses, had maintained the "Frontier Market" status on Qatar, dashing hopes that it would be upgraded to the next tier of "Emerging Market" countries.
The body cited stringent foreign ownership limits for its decision to maintain the "Frontier" status.
Allowing higher foreign ownership would not only help boost the market and liquidity but also ensure a proper valuation of the stock, analysts were quoted as saying.
However, there are apprehensions that foreign investors may bring with them uncertainties amid concerns that any change in the global economic situation may make foreign institutions the first to give a "knee-jerk" reaction.
There are also certain underlying companies, which are not inclined to increase the foreign ownership limit, fearing the dilution of domestic control, the analysts said.
