Posted on November 03, 2016

Qatar Financial Markets Authority (QFMA) and International Capital Market Association (ICMA) hosted the QFMA and ICMA Conference: Developing a Corporate Debt Market on 2nd November 2016 at Intercontinental Doha - The City, Doha, Qatar. Regulatory Authorities and Leading Commercial and Investment Bankers from the region participated in the event.

Dr. R. Seetharaman (pictured), Group CEO of Doha Bank gave a key note address on “Developing the Qatari Capital market.” He gave insight on global economies “The recent IMF outlook had given global growth of 3.1 percent in 2016. A more subdued outlook for advanced economies following the June U.K. vote in favor of leaving the European Union and weaker-than-expected growth in the United States. As a result, the 2016 growth forecast for advanced economies has been marked down to 1.6 percent. Emerging and developing economies expected to grow by 4.2 percent this year. The hopes of rate hike by Fed has driven US bond yields higher in recent times. The Global bond issuances exceeded $3.56tn this year, with major issuances from European region. The Global Sukuk issuances exceeded $38bn this year, with major issuances by Republic of Indonesia, Islamic development Bank and Federation of Malaysia. ”

Dr. R. Seetharaman gave insight on GCC bond market. He said “GCC witnessed bond issuances exceeding $65bn this year. The GCC Conventional Bond issues exceeded $55bn this year. The Major conventional Bond issuances came from Saudi Sovereign- $17.5bn, Qatar Sovereign- $9bn, Emirate of Abu Dhabi - $5bn and QNB - $5.16bn. The GCC Sukuk Bond issues exceeded $10bn this year. The Major Sukuk issuances came from DP world- $1.2bn, Investment Corporation of Dubai- $1bn and Kingdom of Bahrain- $1bn. GCC Government had issued major bonds this year to manage the fiscal deficit. The GCC Sovereign bond issues this year exceeded $35bn, the recent one was the Saudi Bond issue of $17.5bn. ”

Dr. R. Seetharaman highlighted the benefits of a well-developed local debt market in Qatar. He said “A local debt market can facilitate the sterilisation of large capital inflows. It provide tools for the Government to finance large fiscal deficits. It promotes market discipline and transparency through improving the quality and disclosure of information. It enhances financial stability by having a more diverse financial system. The continued investment in infrastructure and other developmental projects increases the need for new sources of funding with long-term maturities. This can be partially addressed through the issuance of long-term debt instruments. The low oil prices may affect diversification and infrastructure development funding and hence debt is the ideal solution for Qatar’s infrastructure development needs.”

Dr. R. Seetharaman highlighted on various Key reforms in Qatar in recent years. He said “Qatar exchange started treasury bill trading w.e.f Jan 2012. Based on various reforms brought in recent years, in May 2014, the MSCI upgraded the Qatar indices to an emerging market from frontier markets, a move that made the equity markets part of other emerging markets. In 2014 a law introduced which stipulates that non-Qatari investors are allowed to own no more than 49 percent of the shares of Qatari shareholding companies listed on Qatar Exchange. A law governing the Qatar Financial Centre (QFC), aimed at simplifying procedures for foreign investors, will hopefully be introduced in the near future. In 2015 the QFC Authority and Qatar University signed an MoU on initiatives in finance research and education for Qatar's future.”

Dr. R. Seetharaman gave insight on the measures which need to be taken. He said “Qatar has one of the widest range of maturities as compared to other GCC international issuances. Given this edge, the Qatari companies can benchmark the yield curve through debt issuances and benefit from lower interest rates. The wider range of maturities not only allows to benchmark but also benefits the companies to align with any mismatch in Asset-Liability. Qatar remains an attractive destination for debt investors on account of its strong credit rating at “AA”. A higher credit rating of “AA” implies zero risk weight and 100% in liquidity coverage ratio. Given the climate change, resource scarcity and water distress; Green bonds can be considered as an option. The GCC banks can tap long term funds to finance the Green projects. There should also be appropriate reforms to existing bankruptcy laws in Qatar to ensure adequate investor protection. Further, Qatar may improve the efficiency of settling disputes by aligning arbitration regulation to international standards.”

In this concluding remarks he said “A developed debt market is the key to Qatar’s financing needs.”