Amidst muted growth expectations in global markets, economic outlook for the GCC region as a whole remains positive, as the surge in oil revenues and fiscal reforms will provide the necessary cushion for GCC countries to support economic growth through capital expenditure. With the exception of Bahrain, where there is weakness in government finances, economic factors remain largely favourable for the region.
Markaz noted in its “GCC Stock Market Outlook 2019” that the growth in corporate earnings is expected to witness an uptick in the GCC during 2019 with the exception of Bahrain and Saudi Arabia. Banks will be the primary growth drivers, as the sector is expected to see a rise in profitability and credit growth due to tailwinds such as rising interest rates and new infrastructure projects. Commodity related companies are likely to see their earnings drop due to the fall in oil prices while the construction sector is expected to mildly rebound after years of underperformance.
Markaz analysts noted Qatar’s banking sector remains healthy overall, reflecting high asset quality and strong capitalization. “Registering the best performance among its GCC peers, Qatar Stock Index saw a growth of 20.83 percent in 2018. Most of the sectors had a positive year with Banks and Financial Services and Consumer Goods and Services registering the highest growth of 43 percent and 36 percent, respectively.”
Citing global ratings agencies ‘latest reports, Markaz noted blockade forced Qatar to diversify its revenue sources, ultimately making it more self-sufficient, which caused the market to rally in 2018.
In December 2018, Qatar announced its planned departure from Opec, the 15-member cartel of oil-exporting countries whose largest producer is Saudi Arabia. The withdrawal from Opec was justified by Qatar’s- long-term strategy of shifting focus towards gas and away from oil. The country believes this move will enable it to work towards cementing its position as the world’s top LNG exporter. The market has taken this news positively since the index has gained an additional 1.76 percent since the announcement.
Corporate profits rose 8.2 percent on a year-on-year basis. Qatar’s banking system remains healthy with ample liquidity, high asset quality and strong capitalization. Deposit growth of 6 percent and loan growth of 5 percent is expected this year, which should result in a further decline in the loan-to-deposit ratio. The blue chips saw a strong growth led by the strength from the banking sector. Qatar national bank and Qatar Islamic Bank, were the top blue chip performers with the share price rising 55 percent and 57 percent, respectively for the year. Industries Qatar which registered a drop of 31 percent in its net profits in Q3 of 2017, saw a 58 percent rise in its net profits on the back of higher products prices. Consequently, its share price has registered a growth of 38 percent in 2018.
Qatar’s real estate sector is expected to see more growth, especially in the beginning of next year, due to various factors, including the government support and legislative changes on the ownership of properties by foreign investors, which is likely to encourage investments in this sector.
On 2019 expectations, Markaz analysts elaborated that economic conditions in the gulf region are set to improve in 2019, after the rebound of prices witnessed in the first three quarters of 2018. Despite the correction seen in the closing months of 2018, oil prices are expected to stabilize at levels close to $65 per barrel, giving leeway for GCC government to adopt an expansionary stance to support economic growth through capital expenditure.
Source from: The Peninsula