Qatar has had a very difficult 2017 after a Saudi Arabia-led group of Arab nations accused the gas-rich state of supporting terrorism and destabilising the region. Qatar denies the accusations. The political problems has seen a sharp selloff in Qatari shares and is set to end this year as one of the world’s worst performing markets – down 18% as of the end of trade today.

We still see politics remaining a key factor throughout 2018 however; HXL sees buying opportunities as some shares are now trading at fair valuation levels not seen since 2014 when most Qatari shares were trading at a premium price. Qatari shares are set to start next year near their cheapest levels relative to emerging-market peers since early 2010.

Recent 2018 Budget announcements emphasising the importance of the private sector, food security and infrastructure spending, geared primarily to the 2022 World Cup, should likely support stronger economic growth next year.

In a recent HXL Commodity Research Note, we forecast that the price of oil and natural gas will continue to increase next year. Therefore, stocks in the petrochemical sector should be considered.

Recent third-quarter earnings showed local banks broadly resilient with funding costs under control despite the outflow of non-resident deposits and superior credit growth in other Gulf countries. We expect the government to continue to support lenders in order to attract deposits and business lending to underpin economic growth.

Overall investors should invest in companies with higher dividend yields and diversified growth potential. Shares like Qatar National Bank, Qatar Electricity & Water and companies in the petrochemical industry should be considered as buying opportunities.

HXL Partners

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