Qatar braces for FIFA World Cup stock market boom

Qatar braces for FIFA World Cup stock market boom

Doha, Qatar – Qatar is bracing for a boom in the FIFA World Cup stock market as the country’s stock market is poised to benefit from the colossal event ahead.

With more than $4 billion in 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 as the mega competition approaches and should continue in the same direction the year following the tournament.

Historically, the average MSCI stock market index of the host countries of the previous seven World Cups, excluding Brazil, rose 21.8% in the year before the World Cup and 13.4% l next year, compared to the MSCI World. Average index growth of 4.3% and 9.5% respectively.

Brazil’s MSCI index was an outlier and fell 34% in the year after the final match in 2014. This decline was due to domestic economic conditions, a political crisis and the high inflation that prevailed in the time, according to analysts.

However, 2022 is proving to be an extraordinary year as stock markets feel the brunt of interest rate hikes from central banks trying to fight inflation and cut off the supply of easy money that began during the pandemic. Qatar’s stock market was not spared 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% between the start of 2022 and April 11, 2022, but fell. then declined to almost flat territory at the end of June and rose again by 12.1% since the beginning of the year on September 5, 2022.

While that may not seem like much, it still puts the QSE index in relative outperformance among most major regional and global markets in the first eight months of this year, according to the latest available data.

“As the country has been preparing for the World Cup for more than a decade, focusing on a short period of stock market performance will not be a fair reflection,” said Akber Khan, senior director of asset management. at Al Rayan, based in Doha. Investment.

“If we look at the performance of Qatar’s stock market over the past five years, when World Cup-related preparations accelerated in terms of work pace, Qatar’s stock market grew by more than 50%.” , Khan added.

During this period, the broad index of emerging market stocks fell by more than 20%, while global equity indices rose by around 15-18%, he pointed out.

“Show a developed Qatar”

Since 2010, when Qatar won the right to host the World Cup, the state has spent more than $300 billion upgrading its infrastructure, including the Doha Metro, thousands of miles of roads and highways local communities, a new port, a new airport and even a new city, as well as the strengthening of its oil and gas facilities.

“It really advances a lot of the medium-term development projects that the state had and in many cases many of the projects that would have been completed over a decade are already completed to show a developed Qatar during the World Cup,” Khan added.

World Cup QSE gains are also expected to continue into next year, driven mainly by spending on construction, real estate, tourism and retail which trickles down to listed companies and the whole economy.

“Specifically, Qatar’s goal is to use the event as a springboard to showcase its offerings and hopefully grow international tourist arrivals from 2.1 million in 2019 to 6 million a year from by 2030,” said Saugata Sarkar, head of research at QNB Financial Services.

Qatari equities are already in an ideal position for investment, benefiting from unique tailwinds. In addition to high oil and gas prices, large net inflows of foreign investment given Qatar’s status as a safe haven and hosting the upcoming World Cup, the country has also embarked on an expansion of its liquefied natural gas (LNG) facilities which will nearly double its gas production, catapulting it to pole position as a major producer.

“We believe that these factors could be broadly priced into the market, but should provide the QSE Index with high quality catalysts that contribute to market growth or stabilization despite the prevailing global risk aversion backdrop,” he said. said Sarkar.

“While we cannot rule out short-term market volatility, we remain bullish on Qatari equities longer term given their defensive characteristics underpinned by their strong fundamentals. Net-net, we expect strong corporate results Qataris in 2022, largely driven by the FIFA World Cup,” he added.

The spoiler will be the war in Ukraine, he warned, which keeps Qatari and global indices volatile.

However, what works in Qatar’s favor as the world faces the possibility of a recession is the fact that the country’s economic growth is tied to its gas production.

With new demand from Europe due to the war in Ukraine and the fact that Qatar is the “cheapest” producer, “it is better prepared to absorb the negative impact that a recession could have on the energy prices,” said Mohsin Mujtaba, Director, Product and Development, QSE. It will also be attractive to foreign investors looking to rebalance their portfolios in the face of the global slowdown, he added.

Long term effect

According to regional equity experts, the plans launched by the government of Qatar 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 while the hundreds of thousands of visitors coming for the month-long football tournament will have an immediate effect, “more lasting consequences on the economy and the country’s financial markets could be recorded.The widely watched event could draw the attention of individuals and businesses to Qatar as a tourist location and investment destination stimulating capital inflows.

Oliver Kent, managing director of Dubai-based ZK Sports & Entertainment, said he sees the World Cup as “just the start of a series of large-scale events that will attract large numbers of visitors, boosting the long-term tourism sector”. citing a Formula 1 race and the 2023 Asian Cup the country will host next year.

Qatar 2022 CEO Nasser al-Khater expects the FIFA World Cup to contribute $17 billion to Qatar’s economy during the event, compared to an initial estimate of $20 billion.

While the main beneficiaries will be the hospitality industry, including hotels, malls, shops and retail, Al Rayan Investment’s Khan said several listed small- and mid-cap companies that have won contracts governments as suppliers to large corporations in recent years will also benefit. These include companies that provide paving stones and building materials, as well as apartment rental and security services, among others, he said.

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