Qatar Goes Its Own Way As An Emerging Market In The Gulf
Doha makes a play. On July 10, the Qatar Investment Authority (QIA), based in the capital city of Doha, announced that it was buying a minority position in Monumental Sports & Entertainment – owners of the NBA’s Washington Wizards and NHL’s Washington Capitals, to name a few. The QIA is no stranger to Washington. It is the principal owner of CityCenterDC, a mixed-use real estate development which brought a little bit of Doha swag to the capital.
“From a political standpoint, it means further legitimizing Qatar as a business partner in the West, including in the heart of American politics,” Yoav Dubinsky, Instructor of Sports Business at the Lundquist College of Business at the University of Oregon, told ESPN.
Qatar has long charted a policy path that is different from its neighbours. Unlike rivals Saudi Arabia and the United Arab Emirates, Qatar has made no overtures to join the BRICS+ movement – a group of countries led by Brazil, Russia, India and China that seek to create an alternative to the G7, politically and economically.
Qatar is well-placed to “pursue its national transformation journey, ensuring sustainable economic growth, and continuing to build a knowledge-based economy while improving the overall quality of life,” Bassam Hajhamad, Qatar Country Senior Partner and Consulting Lead at PWC in Doha wrote in a Qatar investment report back in February.
As an emerging market investment story, Qatar is smaller than Saudi Arabia and the UAE. On the other hand, that makes Qatar a lower-cost investment for portfolio investors. The iShares MSCI Qatar (QAT) has a 72% correlation with Henry Hub natural gas spot prices, making it like a utility-plus stock, and it pays dividends of nearly 5%. This is thanks to Qatar being the dominant LNG force in the region, which is a cash cow. Qatar plans to increase its liquefied natural gas (LNG) capacity to 110 million tons per year by 2026, Reuters reported.
“Sustained high energy prices and increased demand for alternative natural gas supply to Western Europe will continue to propel Qatar’s development,” Hajhamad says.
Investors have been rewarded compared to the general emerging market benchmark. Since 2020, without the help of a printing press or Covid stimulus checks, Qatar outperformed the MSCI Emerging Markets Index by more than 700 basis points.
Investments in iShares MSCI Qatar fund are up only around 2%, but that’s better than investments in the iShares MSCI Emerging Markets (EEM), dominated by China, which is down nearly 9% since 2020. The United States Natural Gas Fund (UNG), an exchange-traded fund that tracks natural gas futures, is down 60.4%.
Qatar is AA rated. Its bonds pay around 4% yield. They’re not a debt risk. Fitch Ratings upgraded Qatar’s profile in May.
Restrained current spending trends will allow Qatar to maintain budget surpluses until 2025, even with natural gas prices in decline from its Ukraine war peaks last year, Fitch analysts, led by Cedric Berry, wrote in their report in May. North Field’s natural gas expansion will bring in more revenue and lower Qatar’s debt ratio. Fitch forecasts their debt/GDP ratio to fall to about 45% of GDP in 2023 and 42% in 2024, from a peak at 85% in 2020.
