DOHA: A sustained oil price downturn is likely to result in considerable capital expenditure downsizing of strategic projects in the GCC. Given the sizeable investment by the government, Qatar’s capex pipeline may be relatively resilient, the Qatar-focused GCC equity investment Fund “Qatar Investment Fund (QIF)” noted yesterday.
The current slump in energy prices might not affect the nation too adversely as Qatar’s long term strategic gas sale contracts should mean less price volatility. Compared to other GCC nations, Qatar is in a better position to withstand lower oil prices, as it enjoys one of the lowest per barrel budget costs, the QIF said.
The Fund, however, decreased its real estate exposure in Q4 2014, reducing exposure to two major real estate companies, and reallocated the cash into other sectors, mainly in the banking sector. “This move has yielded positive results for the portfolio, as these two stocks corrected significantly by 18.7 percent and 30.1 percent respectively, during final quarter. The company’s weighting in telecom, transportation and insurance was broadly unchanged”.
The Fund remains positive on Qatari banks because the infrastructure development plans announced by the government are expected to support lending activity, from which domestic banks will benefit.
The QIF’s banking and financial sector weighting rose from 41.0 percent in Q3 2014 to 52.0 percent in Q4 2014. Qatar National Bank remains QIF’s largest holding at 17.7 percent of net asset value, followed by Commercial Bank of Qatar at 9.4 percent.
Industrials sector remain the second largest exposure at 16.8 percent of net asset value (NAV). The allocation to industrials decreased from 22 percent in Q32014 to 16.8 percent in Q42014. Industries Qatar remained the largest holding in the industrial sector at 6.6 percent of NAV.
On Qatar’s economic outlook, the QIF analysts said: “While a large chunk of government spending is allocated to urban, utilities and transport projects, a significant amount is committed to the FIFA 2022 World Cup and ancillary projects. Widespread infrastructure spending remains the engine of Qatar’s growth potential, as these contracts help economic activity in related industries.”
The growing population, helped by an influx of expatriates, should help domestic demand, notably in sectors such as financial services, consumer, transport and communications, and tourism. Hence the Fund favours selected banking and consumer-driven companies. “The recent correction in the Qatari market gives fresh entry points for long term investors seeking robust earnings growth potential and attractive dividend yields.” The Peninsula
