Qatar urges firms to lift foreign ownership limits
Qatar in talks with companies; No blanket increase seen - Doha bourse official; Increase in limits necessary to win MSCI upgrade
June 22, 2011 3:29 by p.deleon
Qatar is in talks with individual firms to raise foreign ownership limits yet is not planning a blanket increase despite a requirement by index complier MSCI, a Doha bourse official told Reuters.
MSCI has extended a review on whether to upgrade Qatar and the UAE to emerging market status to December, warning Qatar’s 25 percent foreign ownership limit would disqualify the gas exporter.
“We will continue to talk to individual companies to convince them to raise their limits and will continue discussions with the relevant ministries for an across-the-board raising,” a Qatar Exchange official, who declined to be identified, told Reuters on Wednesday.
“But there is no new plan as such to raise the limits across the board: it’s too early.”
Qatar law allows companies to ask for an increase in their foreign ownership limits, he added.
“We have the impression Qatar’s government is worried about the impact of foreign money coming into the market,” said Fahd Iqbal, EFG-Hermes strategist in Dubai. “It’s difficult to gauge how quickly Qatar will look to raise foreign limits.”
MSCI warned that blue-chips such as Industries Qatar (IQ) have almost reached their foreign ownership limits and so are “quasi-uninvestable for foreign investors”.
IQ’s small free float means its foreign limit is effectively 7.5 percent of its total shares, Iqbal said.
“If a bellwether like Industries Qatar is not investible, it doesn’t make it worthwhile for foreign investors to get to know the country,” said Hashem Montasser, managing partner at Frontlane Capital, a Dubai-based asset management firm.
“The rules need to be relaxed so we have a larger investible universe.”
MSCI said extending its review would allow market participants more time to give their feedback on new Delivery versus Payment (DvP) settlement systems, introduced in May in Qatar and the UAE.
Already, some institutions have said they are worried about what happens with failed trades under the new system.
“This is a serious concern and could prevent the countries being upgraded in December,” added EFG’s Iqbal.
Jeff Singer, chief executive of Nasdaq Dubai — one of three bourses in the UAE — said the MSCI extension should be taken positively.
“The extension gives exchanges and regulators another bite at the apple,” said Singer. “Further evolution is required to create an ideal capital market environment.”
These requirements include raising foreign ownership limits, introducing stock borrowing and lending and short selling, plus creating a deeper derivatives market, Singer added.
Foreign share ownership in the UAE is capped at 49 percent, but limits for many blue-chips are much lower.
Telecom Etisalat is restricted to UAE nationals, Dubai’s top lender Emirates NBD is capped at 5 percent and First Gulf Bank and National Bank of Abu Dhabi each have 25 percent limits.
By Regan E. Doherty and Matt Smith
(Editing by Dinesh Nair and David Hulmes)