Doha: Qatari stocks are expected to show recovery in the earnings as a result of improved operating environment in the third quarter (Q3) of this year, said QNB Financial Services (QNBFS) in a report.
The report said, “We expect Qatari stocks under coverage to exhibit both a year-on-year (YoY) and sequential recovery in earnings on a normalised basis in Q3 2021. In aggregate, normalised earnings should increase by 7.3 percent year-on-year (YoY) and 7.1 percent quarter on quarter (QoQ); the year-on-year (YoY) growth in normalised earnings is attributable to an improved operating environment in Q3, 2021 against Q3, 2020 when strict counter-COVID-19 measures were in place.”
On the other hand, the expected QoQ increase is supported by a further recovery in commodity prices. Industries Qatar should make a notable positive contribution to the sequential net income performance of stocks under our coverage. On a YoY basis, Industries Qatar and Commercial Bank should post a substantial surge in earnings, mainly due to a low base effect, it said.
QNBFS report further said, “As we had expected, the QE Index started to gain momentum in Q3, 2021 buoyed by improving oil prices, the Qatari cabinet’s approval to allow up to 100 percent foreign ownership in four major banks (QNB, Qatar Islamic Bank, Commercial Bank, Masraf Al Rayan) and improving relations with prior blockading countries.”
It noted, MSCI/FTSE-related flows as foreign ownership limit (FOL) increases are implemented and increasing optimism about the upcoming dividend season should continue to provide legs to this rally. “Furthermore, with the FIFA World Cup Qatar 2022 finally around the corner, we believe the Qatari stock market will benefit from the sheen of this unprecedented success enjoyed by Qatar on the global stage,” it added.
Over the medium-to-long-term, the North Field Expansion Project and Qatar National Vision 2030 investments continue to be major growth drivers for local companies. On top of Qatar’s macro strengths, Qatari companies enjoy robust balance sheets backed with low leverage and decent return on equities (RoEs), whereas Qatari banks stand out with their exceptional capital adequacy ratios, healthy non-performing loans (NPLs), strong provision coverage and high profitability.
With coronavirus continuing to affect the real economy, global emerging market equities as well as Qatari stocks could stay volatile. “We continue to remain bullish longer-term on Qatari stocks given their defensive characteristics backed by their strong fundamentals and reasonable valuations, coupled with Qatar’s effectively handled vaccination program, which reduces COVID-19 variant risks substantially,” the report said.
