The Single Window System will streamline the process of listings and IPOs and ensure that more private companies participate in the financial markets, a trend that will be critical in the coming years, both to fund large-scale projects and kick-start the SME sector.

An overarching weaker energy price-induced slowdown and its appurtenant reflections across the sectors has challenged Qatar's growth trajectory but its domestic bourse has taken up the challenge to itself in ensuring a smooth path to the corporate sector, whose role in supporting the overall economy is now strategic and on the rise. Thus came an effective solution of easing the process of tapping the vast liquidity through Qatar Stock Exchange's (QSE)  'Single Window System', a move that will help attract private and family-owned companies, which constitute more than 80% of Qatar's non-hydrocarbon sector, and more particularly small and medium enterprises (SMEs) to the market.

Unlike in the past when companies had to approach the Qatar Financial Market Authority (QFMA), a prospective firm now needs to apply to the QSE's listing department, after which the eligible applications will undergo review by a listing committee comprising members from both QSE and QFMA, and then be submitted to QFMA for final approval, effectively cutting down the waiting period.

It is understood that many firms, including those in the Qatar Financial Centre (QFC), wish to go public and that the proposed four exchange-traded funds may take advantage of the Single Window System to get listed on the QSE, the second largest bourse in the Middle East and North Africa (MENA) and Gulf Cooperation Council region. More than raising capital, the listing brings with it multiple impacts on the local economy both quantitatively and qualitatively.

Coincidental as it may sound, no sooner did QSE become the nodal agency to receive the applications for public offering, and listing and admission to trading, than Qatar First Bank (QFB), whose listing was in the air for quite some time, gained momentum. The amendments in the relevant QFC laws also helped the Islamic bank, authorized by the QFC Regulatory Authority, to finally find its way into the QSE, a move that will encourage other QFC firms to adopt. "I am confident that this milestone (QFB listing) will trigger more listings. The QFC remains committed to providing the right support to facilitate the success of its firms and empower its business community to further develop Qatar's financial services sector," says QFC Chief Executive Officer Yousuf Mohamed Al Jaida.

Through its debut, QFB has attached many feathers to its cap as it is the first listing on the QSE in 2016; the first QFC entity to be listed on the QSE; the first private sector entity to be listed on the QSE in six years; and the first bank to be listed on the QSE in nine years. With its listing, the total number of listed firms on QSE has risen to 44, thus adding to the depth and choices. QFB Chairman Abdulla bin Fahad bin Ghorab Al Marri highlighted many advantages of transforming itself into a public bank as it ensures more credibility and accountability as well as leaves the door open for future ratings, which offers easy access to the liquidity pool.

The QSE's Single Window System has put necessary conditions for public offerings (initial or follow-on) and listings, especially at a time when the country's non-hydrocarbon sector is growing faster and taking a larger share than the hydrocarbons, but it may not be sufficient as the timing of initial public offerings (IPOs) and listings depends on valuations as well as other factors that are also external in nature, such as clarity in the global energy market.

"Given the continuing uncertainty in global economic performance and fluctuating oil prices the outlook for MENA IPO activity is likely to remain subdued in 2016 unless confidence improves. The key drivers to MENA IPO activity continue to be fluctuating oil prices, regional geopolitical factors and the performance of the global economy," said Mayur Pau, MENA Strategic Growth Markets and IPO Leader, Ernst and Young.

Notwithstanding EY's views, QSE Chief Executive Office Rashid bin Ali Al Mansoori, who expects more listings, was articulate in delineating the benefits of the Single Window System, saying that "it will speed up the process because we work with the companies a year before the listing". He said the new system is a recognition of the joint willingness to enhance investments in the capital markets in accordance with the governmental directions which consider the QSE as a mirror of the national economy.

It is certainly beneficial for the corporate private sector, considering their potential funding requirements in view of the vast infrastructure development in the country in the run-up to the 2022 FIFA World Cup and also the reluctance of the banking sector to extend loans, apprehensive of rising delinquencies and poor asset quality. The country's banking landscape witnessed a marginal increase in non-performing loans to 1.7% in 2015. Moreover, Qatar Central Bank's stipulation on a 100% loan-deposit ratio, the credit rationing in view of stricter Basel III norms and lower deposits, especially from government and government-related enterprises, have made the lenders go on the defensive, thus choking the funds to the private sector, which has been asked to shoulder greater responsibility by HH the Emir Sheikh Tamim bin Hamad Al Thani.

According to global credit rating agency Moody's, the banking sector ought to witness some pressure on lending capacity and intensified competition in deposit mobilization due to Qatar Central Bank's stipulation to limit the loan-to-deposit ratio to 100%, starting from 2017; given that the current level is 108% sector-wide and that it expects the banks to maintain a relatively high growth trend. Therefore, it has become imperative for the businesses to explore alternative ways of raising capital, which also includes IPOs, according to Hady Kotry of KPMG Qatar.

The new Single Window System is expected to augur well for the country's primary market, given that Qatar is planning to privatize some of its government entities and that four Qatar Petroleum subsidiaries are set to be listed over a 10-year period with their total listing value to be $50 billion. Doha Global Investment, Barwa Bank, Qatar Airways, Mowasalat and Al Jazeera had earlier announced their plans to float IPOs, which are regulated under the relevant laws of commercial companies, QFMA and the QSE rule book.

"QSE is ready to cooperate with all the companies wishing or planning to list on the stock exchange, especially in view of the fact that the stock market has ample and qualified expertise to guide the companies through the listing requirements and procedures in order to ensure the readiness of their applications to obtain the required approvals of the regulatory authorities," said its listing director Abdul Aziz Al Emadi.

Qatar's SMEs, which are waiting in the wings to unleash their potential, would increasingly find the Single Window System more beneficial as the QSE's Venture Market is expecting the first batch of firms to get listed within this year. "From the technical and regulatory framework we are ready. We are working with the regulator (QFMA) and QDB (Qatar Development Bank) to have the first batch," Al Mansoori had said earlier.

The SMEs have a more benign environment with QFMA stipulating a minimum capital of QR5 million (50% paid up) against a higher requirement of QR40 million (50% paid up) in the main market. QFMA has also stipulated a minimum of 20 shareholders and a minimum float of 10% for SMEs against 100 shareholders and 20% free float in the main market.

Now with QSE's financial infrastructure getting streamlined and sophisticated, it is just a matter of time for the bourse to see the advent of exchange-traded funds, derivatives and corporate debts. It is also time that the private sector takes the full advantage of the Single Window System to fast strengthen their capital base in order to participate better in the country's growth story.

© Qatar Today 2016