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country report
Qatar
Sukuk issued by two of Qatar’s Islamic banks, both taking
advantage of strong liquidity for regional issues. Early in the month
Qatar Islamic Bank, the country’s largest Shariah compliant bank,
issued a US$750 million five-year Sukuk. This was followed a
week later by Qatar Islamic Investment Bank which launched a
five-year US$700 million Sukuk. Both issuances were more than
six times oversubscribed, indicating the likely success of future
rumoured issuances by Qatar’s other Islamic banks in 2013.
Qatar’s Islamic banks, as well as its conventional ones, will
continue to look to the capital markets in order to diversify their
investor base and lengthen the maturity profiles of their liabilities
in order to ramp up their books for Qatar’s anticipated funding
requirements.
We are also seeing continued positive developments in Qatar’s
stock market as the Ministry of Economy and Finance (MEF)
transferred regulatory oversight for the market from the Qatar
Financial Markets Authority to the QCB, thereby providing the
market with the stability and certainty of a single regulatory body.
The MEF is also encouraging Qatari-owned companies to list
their shares on the Qatar Exchange, thereby providing them
with capital and increasing market liquidity and activity. Finally,
we’re seeing positive steps being taken to facilitate the access
to capital by small and medium-sized enterprises (SMEs) by the
creation of a junior bourse, QE Venture Market, which has lighter
and more flexible regulations designed to provide the opportunity
for SMEs with a minimal track record and a higher risk profile to
be listed.
Notable examples of
product expansion are the
launch by Masraf Al Rayan
of a subsidiary brokerage firm to
buy and sell Shariah compliant
financial instruments
There was a steady stream of financings this year for Qatari
companies. Notably, Doha Festival City procured QAR3.7 biilion
(US$1.01 billion) in financing for the development of one of the
largest multi-use developments in Qatar. The financing package
represented the largest private sector financing in Qatar and
consisted of both an Islamic facility (based on Istisnah / Ijarah) and
a conventional facility, with most of Qatar’s banks participating.
And recently Qtel signed an Islamic financing facility, securing
US$500 million under an 18-month revolving Murabahah facility
with Qatar Islamic Bank.
when it purchased the Islamic Bank of Britain, and of course the
deal that everyone was talking about for months, the acquisition
of 60% of the shares of EFG-Hermes, the biggest publicly traded
Arab investment bank, by Qatar’s QInvest. The new investment
banking joint venture will be formed by the combination of EFG-
Hermes’ investment banking, asset-management and brokerage
business and QInvest’s local reach and capital. This will greatly
expand QInvest’s limited geographical reach while giving EFG-
Hermes the ability to source Qatari capital and clients. This
comes right around the time that we are waiting to hear if Qatar’s
dominant banking player, QNB, will finalize a purchase of Société
Générale’s 77.17% stake in Egyptian lender, National Société
Générale Bank.
2013: A preview
While the headline economic growth that we saw in Qatar in 2011
slowed in 2012 (GDP growth of 6.3% is expected in 2012, down
from 14.1% a year earlier), it is anticipated that Qatar will remain
the fastest-growing economy in the GCC due to the government’s
capital spending on major multi-year infrastructure projects.
Qatar will continue to set the stage for regulatory certainty in 2013.
If the QFCA implements measures that match the QCB’s 2010
announcement to separate Islamic finance from conventional
banking, the playing field will be leveled for Islamic banking in
Qatar across all regulatory regimes. And the issuance just this
month of a law that clears the way for setting up an umbrella
regulatory body for banks, financial services companies,
exchange houses, and insurance providers (including those
registered with the QFC), bolstered by the QCB’s steps to ensure
proper implementation of Basel III and FATCA, will take us into
2013 with increasing confidence across all sectors.
For the Islamic banks, the 2012 runaway success of Sukuk
issued by both the government and the Qatari Islamic banks
suggests that we will see more of the same in 2013. We have
already heard Qatar Petroleum and Masraf Al Rayan announce
that they are preparing to issue, and Barwa Bank itself is rumored
to have one in the works. Taking advantage of the demand in the
market for high-grade paper is just what Qatar’s Islamic banks
need to grow their balance sheets in order to take advantage of
anticipated infrastructure funding requirements.
In short, both Qatar and its Islamic banking sector are preparing
themselves for the enormous opportunities for infrastructure
project financing that are on the books. Time is running out,
things need to be done and Qatar is developing its muscle to get
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Amjad Hussain is a partner at law firm K&L Gates’ corporate
and finance practices. He can be contacted at Amjad.Hussain@
klgates.com.
As Qatar’s Islamic banks grow, they are developing new
products and expanding geographically. Notable examples of
product expansion are the launch by Masraf Al Rayan of a
subsidiary brokerage firm to buy and sell Shariah compliant
financial instruments for investors, and the launch by
Barwa Bank of its first fund, The First Investor GCC Equity
Opportunities Fund, which invests in a diversified portfolio
of equities and equity-related securities listed on exchanges
within the GCC countries.
Geographically, we saw expansion by Masraf Al Rayan into the UK
42 February 2013