By Satish Kanady
DOHA: Heavy profit taking pushed Qatar stocks to a record monthly low in June, down 16.10 percent, sharply reversing the strong performance seen earlier this year in the run-up to the bourse’s MSCI upgrade. Yesterday, the market extended its bear run to a sixth straight session to settle at 11,488 points, or 1.55 percent down.
Despite the month witnessing the release of strong economic data, ten Qatari stocks that entered MSCI’s emerging market index tumbled. Masraf Al Rayyan lost the most — 30.64 percent. QIB plunged 25.30 percent, QNB slipped by 10.27 percent, while Commercial Bank and Doha Bank dropped 13.79 percent and 13.97 percent, respectively. Ooredoo shed 23.29 percent and Vodafone was down by 24.45 percent. Industries Qatar edged 10.49 percent down and Qatar Electricity and Water lost 13.55 percent.
However, the market is up by more than 20 percent compared to a year ago. In June 2013, the QE index had settled at 9,275.56 points after gaining 0.41 percent over the previous month.
Analysts noted that Middle East funds had become more cautious about investing in GCC equities after sharp pullbacks. A Reuters monthly survey revealed that only seven percent of fund managers now expect to raise Qatari equity allocations.
“The market fall in our view was largely because of high valuations reached previously, and prudent investors preferring to sell and take profits. At its peak in May, the QE Index was trading at close to 30 percent premium to the emerging markets’ average valuation, with some large cap stocks trading as high as 60 percent premium to our fair value estimates”, Afa Boran of Amwal told The Peninsula.
“With this correction, the market appears reasonably valued once again, although we still find certain individual stocks to be quite overvalued.
“Volatility of this nature is not unusual for a young market like Qatar, where a section of investors lack experience and are probably more influenced by trading momentum than fundamentals.
“To avoid investing in overvalued stocks which may carry substantial downside volatility risk, we urge investors to consult an investment expert.
“Investing can be very rewarding in the long run, especially in a fast-growing economy like Qatar, but careful analysis of company fundamentals is key to avoiding costly mistakes,” Afa added.
Investors lost around QR104bn in June as the market cap fell by 14.20 percent to QR632bn from QR736bn at the end of May 2014. Except the insurance index, all the sector indices ended red with telecoms dropping the most by huge 23.39 percent. Banks and financials lost 17.85 percent.
Trading value during June decreased by 31.24 percent to QR17bn from QR25bn in May. Trading volume decreased by 29.09 percent to 398m shares from 562m.
The banking and financial sector led trading values, but was down to QR7.6bn from the previous month’s QR8.84bn. Industrials sector’s total value declined to QR3bn from QR4.8bn. The value of real estate was sharply down to QR2bn from QR4bn and telecoms nosedived to QR1bn from QR3bn. Of the 43 listed companies, 35 fell in June while seven ended higher.