Qatar’s Running Cup Caper
Qatari shares kept their 20 percent MSCI advance as football governing body FIFA allowed 2022 World Cup preparations to proceed following a corruption inquiry. The host was tentatively cleared of wrongdoing as construction is up 20 percent on an annual basis with groundbreaking for the first stadium and other infrastructure and real estate projects in course. Its reputation was also rescued with stricter Islamic charity rules after concern over ISIS support from international coalition officials, although military backing will be minimal. GDP growth will be close to 6 percent despite the recent hydrocarbon price drop as bank credit jumps 15 percent at home and abroad after a lull on tighter public borrowing controls and the soccer event controversy. Overseas expansion is double that figure with leading banks well-capitalized at 15 percent of assets. Qatar National Bank has been in the forefront and just took a 12 percent stake in pan-African powerhouse Ecobank, whose previous CEO resigned on sweetheart deal allegations. The continent is also a commodities destination as state mining and steel companies head to Kenya, the Democratic Republic of Congo and Sudan and consider gold ventures in Mali and Tanzania. The outward thrust comes as Gulf relations remain sensitive over Qatar’s perceived activism in Middle East disputes and Bahrain complains about luring its professionals with citizenship and compensation packages with the Sunni-Shia tensions there contributing to a 20 percent MSCI loss through November. The ambassador was withdrawn from Doha and many Bahraini families are accused of dual loyalties with fluid geographic ties. A causeway linking the two has been on the drawing board for a dozen years and work still requires billions of dollars in joint financing. The impasse reflects an earlier clash over Arabian Peninsula islands that was referred to the International Court in The Hague. Economic growth is only 3.5 percent under the political-sectarian stalemate which still spills out into the streets, and ratings agencies point to fiscal fragility with the 5 percent of GDP budget deficit. Onshore banks are shielded by strong retail franchises but offshore players rely on regional diversity for profitability.
The UAE continues as the foreign investor favorite with a near 25 percent MSCI gain on 4.5 percent property, construction, tourism and re-export growth. Expo 2020 foresees $7 billion in infrastructure outlays with the site to be half solar powered. Airline passengers are up 15 percent and hotel occupancy is almost 85 percent. The Iran thaw has boosted trade and this year’s $30 billion in debt maturities were covered as quasi-sovereign firms can readily access loan and bond refinancing. Kuwait shares have been barely positive despite their larger weight in the revised MSCI frontier index and replacement of the capital markets regulator. The housing squeeze has become another contention point between the parliament and ruling family as oil-driven growth falls below 3 percent with refinery capacity also stretched.
