FOCUS: Could you give us a bit of background about your exchange?
QE: The exchange opened for trading in May 1997, therefore we’re still a fairly young exchange. We are a fully electronic exchange, with a state of the art trading system (UTP) and a fully integrated central shareholders register. A significant part of the trading nowadays is conducted on-line.
There are 42 companies listed, with a joint market capitalization of around USD 137 billion. Turnover in 2013 averaged at around USD 80 million a day.
In addition to the equity market, the exchange lists T-bills and government bonds since December 2011. The listing of these instruments in part of the governments’ ambition to establish a yield curve for Qatari Ryaal denominated bonds.
There are far-advanced plans to launch the first ETFs on the exchange soon.
Qatar Exchange is a for-profit, joint stock company. After a period of 4 years in which NYSE Euronext was a minority shareholder, the exchange is currently fully owned by Qatar Holding, the country’s sovereign wealth fund.
Trading on the exchange is facilitated by 11 brokers and 3 custodians.
In addition to the blue chip price index (QE20), we publish several sector indices as well as a Shari’a compliant index, an all share index and a total return version of the QE20. Given the fact that our listed companies generally have fairly high dividend yields, the latter is especially important for the measurement of the performance of our market.
FOCUS: How active are foreign investors in your exchange? How accessible is your market?
QE: Around 60% of the total turnover is generated by local investors. More than half of that is traded by individual investors; the rest by Qatari institutional investors.
Foreign investors generate around 40% of the total turnover, a percentage that has increased gradually since the opening of the market to foreign investors in 2005, but especially following the announcement of MSCI to include Qatar in the emerging market index by May 2014.
In total, institutional investors (local and foreign) account for around 50% of the turnover.
The market is easy to access for foreign investors. Apart from a cap on the total holdings by foreign investors in each company, there are no restrictions for foreign investors. In practice, the cap is sufficiently high for most companies and in only a few of them is the cap actually reached.
Currently, foreign investors own around 7% of the stocks listed on the exchange.
To further ease the access to the market, the exchange offers DMA (Direct Market Access) for foreign brokers, obviously through a sponsoring local broker. The DMA gateway enhances confidentiality and speed of access.
FOCUS: What new project/product are you currently working on?
QE: Over the recent years, we have implemented a number of measures to enhance the liquidity of the market. These include tick size changes, adjusting the trading hours, enhancing the number of brokerage firms, introducing the concept of liquidity provision, securities lending & borrowing and several others.
We are currently working with the regulator to introduce margin trading and covered short selling regulation. We are also hoping to shorten the settlement cycle for bonds traded on the exchange to T+1.
And, as said before, we hope to introduce the first ETFs to the market. One of those will be an ETF based on the Shari’a compliant index that we developed jointly with Al Rayan.
In 2014 we also hope to see the first companies listed on our dedicated SME market, the QE Venture Market (QEVM).
FOCUS: What are the challenges you see in your market today and in the future?
QE: Stimulating liquidity, enhancing the free float available for trading and attracting more family owned companies to the market are the key priorities for the exchange currently and in the near future.
Further down the road we expect to develop a derivatives market, with an initial focus on a future on the local index as well as several individual stock options.
FOCUS: How do you assess your exchange’s position at a time of increased globalization?
QE: We expect to continue serving the local economy in terms of capital formation and capital allocation. We believe in the importance of a local exchange meeting the needs of local companies and local investors. At the same time we recognize the importance of international participation in our market and we will continue to offer easy access to foreign investors.
Qatar Exchange is an international exchange with strong domestic roots with a clearly defined vision for its role in a global capital market.
Regionally we are confident that QE is now positioned and recognized as one of the leading exchanges, while globally we will keep working hard to establish ourselves as one of the most attractive stock exchanges for investors around the world taking advantage of our solid and advanced infrastructure and the fast growing economy of our country.