Qatar Diplomatic Cut and its Impact

Transcription

1 Qatar Diplomatic Cut and its Impact Date: 6 th June, 2017 Diplomatic Ties Cut with Qatar Saudi Arabia, the United Arab Emirates, Egypt and Bahrain have cut diplomatic ties with Qatar, in the region s most serious diplomatic crisis. The countries broke off all land, air and sea traffic with Qatar. Yemen s internationally backed government also cut relations with Qatar, as did the government based in eastern Libya. The Republic of Maldives and Mauritius also cut off diplomatic relations with Qatar following the move by several states in the Middle East. Impact on Regional Trade As per Ministry of Development Planning & Statistics (MDPS), as of 2016, GCC countries including Egypt and Yemen exported QAR19.98bn worth of goods to Qatar. While Qatar exported QAR23.2bn worth of goods to those countries in UAE alone exported goods worth QAR10.6bn to Qatar followed by QAR5.0bn from Saudi Arabia. While in terms of exports from Qatar, UAE received QAR13.6bn worth of goods while Egypt received goods worth QAR4.0bn were received by Egypt. The most meaningful relationship in terms of trade is between UAE and Qatar. Geographical Distribution of Exports Geographical Distribution of Imports QAR mn U. A. E. 19,712 15,719 13,666 Saudi Arabia 3,865 2,763 1,893 Bahrain 1, Kuwait 2,663 1,564 2,075 Yemen Egypt 246 2,570 4,054 Oman 1, ,117 23,984 23,167 QAR mn U. A. E. 9,079 10,422 10,602 Saudi Arabia 5,060 5,118 5,042 Bahrain 1,193 1,055 1,167 Kuwait Egypt 1,178 1,314 1,188 Oman 1,402 1,266 1,350 18,773 19,896 19,984 Total Qatar Exports 454, , ,404 Total Qatar Imports 110, , ,690 GCC, Egypt & Yemen % of Total Qatari Exports 6.40% 8.52% 11.12% Source: Ministry of Development Planning & Statistics GCC, Egypt & Yemen % of Total Qatari Imports 16.9% 16.8% 17.1% Qatar s Credit Market Outlook The rating agency S&P Global Ratings in March downgraded its outlook for Qatar to negative from stable on concern that the growth of the country s external debts may continue to outpace the growth of the size of its investments internationally. However, S&P maintained its AA/A-1+ rating on the country, putting it firmly in the high quality credit rating band on the agency s rating scale. 1

2 6/6/2016 7/6/2016 8/6/2016 9/6/ /6/ /6/ /6/2016 1/6/2017 2/6/2017 3/6/2017 4/6/2017 5/6/2017 Moody s Investors Service downgraded Qatar s credit rating by one notch on 26 th May 2017, citing increasing external debt and uncertainty over the sustainability of the country s growth model over the next few years. Moody s downgraded Qatar s long-term issuer and sovereign debt ratings to Aa3 from Aa2, but changed its outlook on the Middle Eastern nation to stable from negative, citing optimism around the implementation of fiscal and economic reforms. Moody's said that the regional rift could have a negative impact on Qatar if it disrupts trade and capital flows. Qatar GDB Impact on Qatar's 2026 sovereign dollar bond Source: Bloomberg (Ticker LW Corp) Qatar's 2026 sovereign dollar bond fell to its lowest level since March on 5 th June after many countries severed ties with Doha. Qatar's 2026 dollar-denominated Eurobond fell 1.8 cents, according to Tradeweb and Bloomberg data, to 99 cents in the dollar. The shorter-term 2019 equivalent also slid, hitting its lowest since at least late Qatar Tourism to be hit by a huge number Qatar looks to generate 5.2% of its GDP through tourism over the coming years, creating nearly 98,000 jobs and managing an inventory of 63,000 hotel rooms. Qatar is also set to invest up to USD45bn in new developments under the National Tourism Sector Strategy These include USD2.3bn earmarked for 2022 World Cup facilities and USD6.9bn for transport infrastructure and associated projects. As per Qatar, Ministry of Development Planning & Statistics, around 2.63mn visitors arrived in Qatar in eleven months of 2016 of which 48.6% were from the GCC amounting to 1.28mn. Although exact breakup of nationals was not provided in terms of nationals but we believe the nationals of GCC would be quite sizeable. Visitor Arrivals by Region (% of total during Jan-Nov 2016) Other Arab 8% Europe 14% Other Asia 23% Source: MDPS Americas 5% Other Africa 1% GCC 49% With countries in GCC saying they plan to break off all land, air and sea traffic with Qatar we believe it would have a huge impact on the tourism revenues of the country. 2

3 Impact on Stock Market First day (5 th June 2017) impact of the cutting ties was pretty severe for the Qatari market as it witnessed a drop of 7.3%. Qatar Gas Transport Ltd., Aamal Co, Qatari Investors Group QSC and Gulf International Services QSC dropped by the maximum of 10 percent allowed by the exchange. Six other companies on the country s 19-member main index dropped between nine and 10 percent, including lender Masraf Al Rayan QSC, which contributed the most to the index move. Qatar Doha Stock Market (DSM) Index 11,500 11,000 10,500 10,000 9,500 9,000 8,500 Source: Bloomberg National Bank, which has a weighting of 17.9 percent in the index, fell 6 percent. The benchmark is the worst performer globally this year, posting losses of 12 percent while shares from emerging markets gained more than 18 percent. We expect the market to remain little volatile for a couple of weeks in light of the diplomatic cut. GCC investors hold 1% of the market capitalization of Qatar s As of 5 th June, GCC investors hold merely 1% of the market capitalization of Qatar Bourse (listed companies). While foreigners and Qataris hold 9% and 90%, respectively. GCC Ownership Percentage in TOP-15 Listed Companies of Qatar 16-Oct Oct Nov Nov Dec Dec-16 8-Jan Jan-17 Volume 5-Feb Feb-17 5-Mar Mar-17 Last Price 2-Apr Apr Apr May May Millions 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 27.0% 25.2% 24.0% 15.4% 12.8% 8.7% 8.5% 6.9% 5.7% 4.2% 3.7% 3.7% 3.6% 3.1% 2.8% Source: Qatar Bourse; Data as of 5th June

4 Notable Qatari Companies Exposure to GCC Following table shows notable exposure of some of the prominent companies of Qatar to the GCC countries. Ooredoo Qatar (QAR 000) Qatar National Bank (QAR 000) Revenue 32,503,259 GCC 4,768,629 GCC % of total 14.7% Assets 719,694,515 GCC 32,335,758 GCC % of total 4.5% Pretax Income 3,126,759 GCC 2,993,431 GCC % of total 95.7% Total Deposits 506,694,587 GCC 13,336,037 GCC % of total 2.6% Assets 90,515,474 GCC 14,609,102 GCC % of total 16.1% Total Loans 520,417,231 GCC 18,098,370 GCC % of total 3.5% Doha Bank (QAR 000) Al Meera (QAR 000) Net Income 1,053,781 GCC (33,909) GCC % of total -3.2% Revenue 2,604,445 GCC 135,650 GCC % of total 5.2% Assets 90,364,949 GCC 9,721,550 GCC % of total 10.8% Net Income 199,877 GCC 2,425 GCC % of total 1.2% Total Loans 59,186,222 GCC 9,576,525 GCC % of total 16.2% Assets 2,190,882 GCC 184,544 GCC % of total 8.4% 4

5 Mannai Corp (QAR 000) Qatar Islamic Bank (QAR 000) Revenue 4,885,644 GCC 1,710,956 GCC % of total 35.0% Assets 139,834,128 GCC 9,433,884 GCC % of total 6.7% Net Income 535,117 GCC 175,486 GCC % of total 32.8% Total Deposits 14,055,114 GCC 67,060 GCC % of total 0.5% Assets 7,731,911 GCC 2,843,945 GCC % of total 36.8% Total Loans 98,170,520 GCC 4,864,925 GCC % of total 5.0% Al Khalij Comm. Bank (QAR 000) Salam Int. Investment (QAR 000) Net Revenues 1,160,349 GCC 187,092 GCC % of total 16.1% Net Revenues 2,912,823 GCC 420,470 GCC % of total 14.4% Assets 60,597,251 GCC 6,830,024 GCC % of total 11.3% Net Income 114,208 GCC (32,889) GCC % of total -28.8% Total Loans 35,180,107 GCC 2,364,677 GCC % of total 6.7% Assets 5,245,670 GCC 478,106 GCC % of total 9.1% Source: Bloomberg 5

6 Ubhar Capital SAOC (U Capital) Website: PO Box 1137 PC 111, Sultanate of Oman Tel: /35 Fax: Disclaimer: This report has been prepared by research department in Ubhar Capital SAOC (U Capital), and is provided for information purposes only. Under no circumstances is to be used or considered as an offer to sell or solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained therein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such, and the bank accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents. All opinions and estimates included in this document constitute U Capital s Research department judgment as of the date of production of this report, and are subject to change without notice. This report may not be reproduced, distributed or published by any recipient for any purpose. 6