DOHA SECURITIES MARKET

The Doha Securities Market (DSM) was established in accordance with the Decree Law (14) for the year 1995. The Market started its activities on the 26th of May 1997 and following the implementation of a Central Securities Registration System in August 1998; electronic trading was started from March 11, 2002.

On April 3, 2005, a law was issued amending some provisions of Law No (13) of the Year 2000 regulating the foreign investment in economic activities.  The amendment allows non-Qatari’s to invest in all companies listed at the DSM at a rate not exceeding 25% of the traded shares. On September 14, 2005, Law No (33) for the Year 2002 was issued relevant to the establishment of Qatar Financial Markets Authority (QFMA) and the Doha Securities Market Company (DSMC). QFMA is an independent and empowered regulatory and supervisory authority for the capital markets in Qatar.    

The Government of Qatar opened the official stock exchange at Doha only on May 26, 1997. There are 17 companies listed on the Doha Securities Market (DSM). The market is expected to mobilize private funds for investment in the privatization projects and projects in the manufacturing, banking, trade and services sectors thereby spreading the economic benefit of industries to the people and help in diversifying the oil-dependent country. The Market is also expected to help local family-owned businesses to expand and spread their business risk.

Currently trading takes place between 10.00 am to 12.30 pm between Sunday and Thursday. 

Listing regulations require a company to have at least 30 shareholders and a minimum paid-up capital of QR 40 million. At least 50% of the nominal value of shares must be fully paid up.

The Doha Securities Market witnessed an unprecedented boom particularly since 2004 following an average annual GDP growth of 15.8% during 1999-2003 based on current prices.  The GDP increased by 20% in 2004 and reached QR 103.56 billion at current prices and further by 33.8%, 24.2% and 25.1% during 2005, 2006 and 2007. We expect the GDP at current prices will touch QR 322.5 billion.

No. of Listed Companies and Market Capitalization

On account of large scale development activities and the booming economy, the Doha Securities Market also witnessed increase in number of listed companies and record appreciation in share prices over the last few years. Number of listed companies increased from 13 in 2003 to 43 by the second half of 2008. Market capitalization also increased from US$ 26.7 billion in 2003 to US$ 135.7 billion by the second half of 2008.

 

 

  

Trading Volume and Price Appreciation

In addition to an increasing number of listed companies, the market also witnessed sharp increase in trading volume and strong price appreciation. Trading volume increased from US$ 3.21 billion in 2003 to US$ 28.01 billion in 2005. During 2006, trading volume declined to US$ 20.58 billion but improved again to US$ 29.91 billion in 2007. During the first half of 2008 trading volume was US$ 28.21 billion.   Share prices also appreciated substantially since 2003 until 2005. The Doha Securities Market 20 Index appreciated by 69.8% in 2003, 64.6% in 2004 and 70.2% in 2005. The market recorded a decline of 35.5% in 2006 but again appreciated by 34.3% in 2007 and 23.8% by the second half of 2008.

 

 

Market Volatility

Being the fastest growing market among the Gulf countries, Doha Securities Market was a place of high speculation and volatility. During the past five years, average daily volatility remained around 2.4%. During January 2008, we witnessed a daily volatility of 2.4% and intra-month variations of 34.92% and subsequently, until August the daily volatility and intra-month variations remained in the range of 0.7% and 13.23% (July) and 1.3% and 27%(April). However, on account of the uncertainties caused by the credit crisis and the onset of recession the Doha Securities Market like its other counterparts became highly volatile subsequently. During September and October, daily volatility increased to 3.7% and 5.2%, while intra-month variations increased to 60.6% and 83.5%, over the same period.

 

Current Valuation Levels and Future Outlook

The DSM 20 Index declined by 31% till October 21, 2008 to touch a low of 8,185.68 points from its June close of 11,863 points, partly on account of panic and negative sentiments created by the current global credit crisis, falling oil prices and looming economic recession in most of the developed countries.  

Qatar’s economic development has moved at a fast pace on the backdrop of its oil and gas resources. Proved oil reserves of 15 billion barrels (588,000,000 m³) should ensure continued output at current levels for 23 years. Oil has given Qatar a per capita GDP that ranks among the highest in the world. Qatar's proved reserves of natural gas exceed 7000 km³, more than 5% of the world’s total, third largest in the world. In the recent past a number of upstream and downstream projects were implemented which added some diversification to its economy in terms of new ancillary and other industrial projects. However, the economy is still primarily dependent on petroleum resources. Petroleum is the cornerstone of Qatar's economy and accounts for more than 70% of total government revenue, more than 60% of gross domestic product, and roughly 85% of its export earnings. Production and export of natural gas are becoming increasingly important. Long-term goals feature the development of off-shore petroleum and the diversification of the economy.

We expect the Qatari Government to spend heavily on physical and social infrastructure in the coming years and gradually move ahead in the path of privatization which will further diversify the economy and bring in more companies into the listed companies domain. 

Companies’ valuation levels are quite attractive at the current price levels and positions can be taken on selected companies on a medium to long-term investment perspective.