Manama: Qatar has announced it’s considering easing the foreign investment limit in listed companies, as the country’s stock market will soon be linked to stock markets worldwide.
"Eventually, it will have to happen. The government is aware of the issue and I believe discussions are going on in the right direction," an industry source told Qatari daily Gulf Times.
Currently, the foreign investment limit is restricted to 25 per cent, but the corporate sector has been asking the government to ease this cap to help bring in much needed capital and to enhance liquidity.
Yousuf Hussain Kamal, the finance minister, last year said 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.
The government could give blanket approval for a foreign investment hike, but it’s for the respective boards of 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 on 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 was quoted in the newspaper as saying that establishing proper support structures, especially for foreign investors, would have to follow at a later stage in the country’s five-year strategy.
QE Chief Executive Andre Went recently said the stock exchange 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’s accompanied by certain changes in legislation to create an enabling environment,” the source added.
MSCI, the body responsible for reviewing all stock exchanges, 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.
Allowing higher foreign ownership would not only help boost the market and liquidity but would also ensure a proper valuation of the stock, analysts said.
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 react.
There are also certain companies, which are not inclined to hike the foreign ownership limit, fearing dilution of domestic control, the analysts said.
