Apr 10 2012
|more articles from|
Qatar: Attracting investment
The country's banks are turning to the international bond market to bolster their cash reserves, which are likely to be needed to help fund the country's massive infrastructure programme over the coming decade.
With the government rolling out a series of big-budget projects, such as the new $11bn Doha airport; a $5bn programme to reinforce the electricity sector; massive road, rail and maritime infrastructure developments; and the preparations for staging the 2022 FIFA World Cup, Qatari banks are anticipating a sharp and profitable rise in loan demand, prompting a wave of bond issuances.
The most recent entrant into the bond market was Doha Bank , which closed the books on a $500m issue on March 11. The bond, which the bank says will be used for general funding purposes required to support its growth plans, proved popular with investors, being oversubscribed almost eight times.
According to Sheikh Abdul Rahman Bin Mohammad Bin Jabor Al Thani, the managing director of Doha Bank , investors in Europe and Asia, as well as the Middle East, snapped up the issue. "It shows the exceptionally high profile of Qatar and Doha Bank in the global market space," he said.
Another Qatari lender, Al Khaliji Commercial Bank, has also announced it is planning to turn to the market, seeking to raise as much as $750m in non-convertible bonds, which the bank has said will assist it in strengthening its involvement in the country's infrastructure development. On March 7, the bank's shareholders voted to approve a proposal for a bond issue at its regular annual general meeting.
Robin McCall, the CEO of Al Khaliji, said the bond would provide funding for an extended period, necessary to maintain a sound asset-liability match and allow it to play a role in the country's escalating building programme.
"If our strategy is to support Qatar in terms of infrastructure development, we need to have longer-term funding. Bonds are a tool for appropriate longer-term funding for the bank," McCall said in an interview with the Gulf Times.
The International Bank of Qatar (IBQ) is also considering the bond market to raise ready cash, with officials saying in early February the bank was looking to offer up to $750m worth of debt in the third quarter, while other lenders are also believed to be looking at options to boost liquidity.
Akber Khan, an asset management director at Al Rayan Investment in Doha, told the Bloomberg news agency in early February that Qatar's banks have a number of motives for issuing debt. "In general, it is to further strengthen balance sheets in anticipation of increased borrowing requirements in the coming quarters, largely public-sector driven, and to diversify sources of funding," he said.
Indeed, while QNB is eyeing higher borrowing needs as the infrastructure surge gains momentum, it is also filling its coffers with a mind to expand through acquisitions, having been closely linked to the sale of Turkey's Denizbank, currently owned by troubled Franco-Belgian lender Dexia. The sale, however, is by no means a done deal, as according to media reports a gap exists between the amount QNB is prepared to pay and Dexia's asking price, and other buyers are watching the situation closely. Even if the sale falls through, though, the move is a firm indicator that QNB is in the acquisitions market.
To further diversify what is on offer on the Qatari bourse, the government listed 10 short-term treasury bills on the exchange on in late December last year. The listing of these treasury bills has attracted the interest of banks, financial institutions and investors, which has created a secondary market that will diversify the country's investment instruments. The government also plans to follow this up with the additional listing of bonds and sukuks, which are also known as sharia-compliant or "Islamic" bonds, sometime in 2012.
The appetite among investors for Qatari bank bonds is fairly easy to understand: in troubled times, money seeks a safe haven. With the fastest-growing economy in the world, and with sovereign reserves estimated at up to $100bn, Qatar presents some of the most attractive investment options anywhere.
© Oxford Business Group 2012
© Copyright Zawya. All Rights Reserved.