Doha, Qatar – Qatar is gearing up for a boom in the FIFA World Cup stock market as the country’s stock market is all set to benefit from the upcoming colossal event.
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 in the run-up to the mega-match. to continue in the same way in the year after the tournament.
Historically, the average MSCI country stock market index of the host countries of the previous seven World Cups, excluding Brazil, grew 21.8 percent in the year before the World Cup and 13.4 percent in the year after, compared to the MSCI World Index average growth of 4.3 percent and 9.5 percent respectively.
The Brazilian MSCI index was an outlier, falling 34 percent in the year after the last competition in 2014. That decline was due to domestic economic conditions, a political crisis and high inflation at the time, analysts say.
However, 2022 is proving to be an extraordinary year as equity markets take a beating rate hikes by central banks trying to fight inflation and the supply of easy money started during the pandemic. Qatar’s stock market has not been immune to it either.
The QSE index, which measures the 20 largest and most liquid stocks on the Qatar Stock Exchange (QSE), rose as much as 24.7 percent from early 2022 to April 11, 2022, but then fell to near-flat territory in late June. had risen again by 12.1 percent to date on September 5, 2022.
While that may not seem like much, the QSE index is still a relative outperformer 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, it is not a fair reflection to focus on a short period of stock performance,” said Akber Khan, senior director of asset management at Doha-based Al Rayan. Investment.
“If we look at the performance of Qatar’s stock market over the past five years, as World Cup preparations accelerated in terms of pace of work, Qatar’s stock market is up more than 50 percent,” Khan added. .
In that period, the broad index of emerging market equities is down more than 20 percent, while global equity indices are up about 15 to 18 percent, he stressed.
‘Show off a developed Qatar’
Since 2010, when Qatar won the rights to host the World Cup, the state has spent more than $300 billion to upgrade its infrastructure, including the Doha metro, thousands of miles of local roads and highways, a new port, a new airport and even a new city, as well as boosting the oil and gas facilities.
“This really attracts a lot of mid-term development projects that the state had and in many cases a lot of projects that would be completed in a decade are already ready to show off a developed Qatar at the World Cup,” said Khan. added.
World Cup gains on the QSE are also expected to be passed on into next year, mainly from construction, real estate, tourism and retail spending trickling down to public companies and the wider economy as a whole.
“In particular, Qatar’s goal is to use the event as a springboard to showcase its offerings and hopefully increase the number of international tourists from 2.1 million in 2019 to 6 million per year by 2030,” said Saugata Sarkar. , head of research at QNB Financial Services.
Qatar stocks are already in an ideal investment position and benefit from unique tailwinds. In addition to high oil and gas prices, significant net foreign investment flows given Qatar’s safe haven status, and the host of the upcoming World Cup, the country has also undertaken an expansion of its liquefied natural gas (LNG) facilities, increasing its gas production will almost double. output, catapulting it to pole position as a major producer.
“We believe these drivers can largely be priced into the market, but should provide the QSE index with high-quality catalysts that help the market grow or stabilize despite the prevailing global risk-off backdrop,” said Sarkar.
“While we cannot rule out short-term market volatility, we remain bullish on Qatari equities over the longer term given their defensive characteristics backed by their strong fundamentals. Net-net, we expect strong results from Qatari companies 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 deals with the possibility of a recession is the fact that the country’s economic growth is tied to gas production.
With renewed demand from Europe following the war in Ukraine and Qatar being the “cheapest” producer, “the country is better prepared to absorb the negative impact of a recession on energy prices,” said Mohsin Mujtaba, director, product and development, QSE. That will also appeal to foreign investors looking to rebalance their portfolios in the face of a global slowdown, he added.
According to regional equity experts, the projects initiated by the government of Qatar to host FIFA 2022 will have a long-term impact on listed companies in various sectors.
Daniel Takieddine, CEO of BDSwiss MENA, said in an email that while the hundreds of thousands of visitors coming to the month-long soccer tournament will have an immediate effect, “more lasting impacts on the economy and financial markets in the country could be registered. The highly-followed event could draw the attention of both individuals and businesses to Qatar as a tourist attraction and an investment destination that stimulates 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 and boost the tourism industry in the longer term. ”, citing one Formula 1 racing and the Asia Cup 2023 that the country will organize next year.
Qatar 2022 CEO Nasser al-Khater expects the FIFA World Cup at the event to contribute $17 billion to Qatar’s economy, up from an initial estimate of $20 billion.
While the main beneficiaries will be the hospitality sector, including hotels, malls, shops and retail, Al Rayan Investment’s Khan said several listed small and medium-sized companies that have won government contracts in recent years as suppliers to larger companies will also benefit. These include companies that provide paving stones and building materials, as well as apartment rentals and security services, he said.