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Qatar Investment Fund – trade and travel ban hindered growth

07
2017
September

Qatar Investment Fund – trade and travel ban hindered growth – in its results statement for the year ended 30 June 2017, Qatar Investment Fund’s chairman, Nicholas Wilson, said “The year to 30 June 2017 was one of mixed fortunes for Qatar. During the period, the country adjusted well to the realisation that oil prices will remain lower for longer. However, in the latter months, a trade and travel ban by four other Gulf Cooperation Council (GCC) countries was imposed that has hindered growth. Qatar is working to mitigate negative impacts of this, including prudent management of its resources and by forming other international alliances.”

During the twelve month period, NAV fell by 8.4% to US$1.1113 which compares with a fall of 8.6% in the Qatari stock market (Qatar Exchange Index) and a gain of 21.2% in the MSCI Emerging Markets Index. Following a widening of the discount at which the shares trade to NAV, the shares fell from US$1.0313 to US$0.899, a fall of 12.8%. Shareholders received a dividend of 4.0c per share with an ex-dividend date of 31 January 2017.

A growing realisation that hydrocarbon prices were going to be lower for longer kept pressure on Qatari stocks for most of the twelve-month period. On 5 June, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt broke off diplomatic relations with Qatar and took further steps to isolate the country. This prompted a sharp sell-off on the Qatar Stock Exchange and took shares to the lowest level for the year.

The manager says that the Banking sector (including Financial Services) remains a priority sector for the fund, at 37.8% of NAV (Q1 2017: 38.8%). However, they went underweight on the sector vs. QE index weighting of 46.4% (Q1 2017: 39.8%), as they believe valuations for some banks look expensive. Qatar National Bank remains QIF’s largest holding (13.9% of NAV). For the period between December 2016 to May 2017, credit in Qatar continued to grow (up 5.0%) driven by the public sector (up 12.2%). The Investment Adviser believes that loan growth will continue in the medium to long term, as the Qatari government is expected to continue with its infrastructure development plans, notwithstanding the current standoff. Qatar is also expected to invest hugely on new development projects in North Field in an effort to significantly increase LNG output. Industrials remain the second largest exposure at 23.3% of NAV (Q1 2017: 23.7%), led by Industries Qatar (10.9% of NAV). The holding in Gulf International Services decreased to 3.4% from 4.5%. Exposure to the Real Estate sector fell to 10.1% from 11.7%, while holdings in the Telecom sector rose to 7.7% from 5.7%. The exposure to the Transportation and Services & Consumer Goods sectors decreased to 5.9% and 2.3% from 6.8% and 2.6%, respectively. Exposure to the Insurance sector reduced marginally to 2.9% (Q1 2017: 3.0%).

QIF : Qatar Investment Fund – trade and travel ban hindered growth

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