World Cup Investment Possibilities
(This is the second in a series of articles originating from “Don’t Forget The Middle East”
Interestingly, and perhaps surprising to many, the small Middle East country of Qatar will host the 2022 World Cup. Qatar’s winning bid beat the United States’ who had been considered the frontrunner for this prestigious tournament.
Qatar's stock market index initially surged the first trading day after the announcement over seven percent at opening and closed up 3.57 percent to 8,477.32 points. The Qatar Exchange is up 21.82% year-to-date as of 5 December 2010.
Qatar borders to the south with Saudi Arabia with the rest of the country surrounded by the Gulf of Bahrain to the west and to the north and east the Persian Gulf. Qatar has a population of 1.67 million with the size of its economy ranking 67th in the world. Qatar’s wealth is reflected by its GDP per capita ranking of 2nd in the world.
Qatar’s largest industries include liquefied natural gas, crude oil production and refining, ammonia, fertilizers, petrochemicals, steel reinforcing bars, cement, and commercial ship repair. Qatar is the 11th largest producer and 5th largest exporter in the world of natural gas. The United States is Qatar’s largest importer while Japan, South Korea, Singapore and India are the largest export partners.
Commenting on Qatar’s prospective GDP growth, Chairman of the Qatar Chamber of Commerce and Industry, HE Sheikh Khalifa Bin Jassim Bin Mohammed Al Thani, stated in late November 2010 “Qatar’s economy is an undoubted success story with GDP growth of approximately 18% this year and perhaps nearing 20% next year. This puts Qatar at the forefront of investors’ minds not just as an example within the GCC (Gulf Cooperation Council) but across the globe.” The International Monetary Fund in October 2010 projected Qatar’s GDP growth comparable to these numbers.
Qatar’s “Foreign Long Term” country credit rating was raised in 2010 by Standard & Poor’s (S&P) to “AA“ from “AA-”—“In our opinion, Qatar's economy is weathering the global downturn well, with deflationary pressures and financial sector problems contained by the economic policy flexibility generated by new gas projects," S&P credit analyst Luc Marchand said in a statement. (S&P, July 5, 2010)
There are a few ETFs that invest in the Middle East region that include the PowerShares MENA Frontier Countries (Nasdaq: PMNA), the Van Eck Market Vectors Gulf State Index ETF (NYSEArca: MES), and the WisdomTree Middle East Dividend ETF (NasdaqGM: GULF). These funds have allocations in Qatari companies of 21%, 23% and 25% respectively.
The London Stock Exchange (NYSE:LSE) lists the stock of Qatar Telecom QSC—GDR (Symbol: QTEL), and the Commercial Bank of Qatar—GDR [REG S] (Symbol CBQS). A stock play on the infrastructure build-out to accommodate the World Cup might be Orascom Construction Industries SAE—GDR (LSE Symbol: ORSD), Egypt’s and the Middle East’s largest construction company.
Of course, direct investment access to Qatari stocks is available on the local Qatar Exchange (QE). This expands opportunities to access the economic growth of Qatar through forty-three companies that are currently listed on the Exchange. For example, a company that may certainly be involved in the midst of the development of the infrastructure necessary to host the 2022 World Cup is Qatar Electricity & Water Company—(QE Symbol: QEWS).
Qatar is as well committed to developing initial public stock offerings. Director of the Listing Department of the Qatar Exchange, Mr. Abdul Aziz Al-Emadi, recently stated “…the domestic and international investor base is keen to tap into the growth opportunities represented by Qatar’s economy and one way of doing this is to increase the number and type of companies listed on our market.”
As always, a word of caution when considering whether to invest in foreign companies or markets: there are many special aspects and risks inherent to this type of investing that have not been presented in this article. This type of investing is not appropriate for all investors. So consider carefully these opportunities and seek the assistance of experienced investment professionals.
(Tom Fyler is President of Commodities & Securities, Inc., a Registered Investment Advisor. Mr. Fyler is also the Principal of a Futures investment management firm, “Wadsworth T. Fyler, Jr.”, registered as a Commodity Trading Advisor ("CTA") with the Commodity Futures Trading Commission ("CFTC") and a Member of the National Futures Association ("NFA"). He may be contacted at info@EssentialsInvesting.com. Mr. Fyler has developed a specialty in investing opportunities in stocks on Middle East stock exchanges.)
Special Risk Disclosure: There are special risks involved when investing on foreign securities exchanges and in the Middle East region that have not been presented or detailed in this article. Investors should make every effort to learn and understand these risks before making a decision whether to invest. Economic projections cited by sources in the article do not necessarily represent the conclusions of the writer. The provision of the information contained in this article should not be construed as an investment recommendation by the writer.
Risk Disclosure: This communication is for informational purposes only and should not be construed as containing or providing specific investment or financial advice. Readers should be aware that there is risk of loss of some or all funds when investing in stocks, bonds, mutual funds, ETFs, real estate, commodities and/or currencies any of which may not be appropriate for all investors, and that there is a risk of loss when using any particular trading or investing strategy. This information may contain statements or forward-looking propositions that should be understood as the opinion, belief or preference of the writer.
Sources For This Article Included: Qatar Exchange, The World Fact Book—Economic Statistics, Qatar Exchange and Qatar Chamber of Commerce Memorandum of Understanding—29-11-2010, International Monetary Fund Report—World Economic Outlook/October 2010, London Stock Exchange MENA Fact Sheet November 2010, PowerShares website, Market Vectors website, Wisdom Tree ETFs website, Qatar Electricity & Water Financial Report—January 2010-September 2010.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.