QSE CEO highlights strategy to improve market liquidity

CEO of Qatar Stock Exchange Rashid Bin Ali Al Mansoori today highlighted the importance of implementing initiatives aiming at improving liquidity in the market as one of the major components to the QSE Strategy aligning with that of the State of Qatar to be sustainable as a business by continuing to create value, diversifying our revenues and investing in and developing our human and corporate capital.
In a speech at the MEED Qatar Projects conference 2015 held in Doha today, Al Mansoori pointed out to the development the QSE witnessed since its establishment in 1997 to become the second largest stock exchange in the region after the Saudi Stock Market. He noted that the average daily trading volume jumped from 300 million Qatari Riyals during the last ten years to 900 million Riyals as an average daily trading during 2014.
He attributed the development to the implementation of an ambitious strategy to increase liquidity in the market and attract more local and international investors.
"We recognize that developing liquidity in the market is important and we continue to develop and introduce initiatives to further enhance the market. The upgrade to emerging market status by both MSCI and Standard &Poors, has led to significant increases in trading activity and market depth. Average daily turnover increased by 160 % during 2014 compared to that of 2013. We are now in discussions with FTSE regarding a potential upgrade in their rankings, which will add further liquidity to the market", he said.
As a means of improving the breadth of the market, and to further improve liquidity, Al Mansoori noted that the QSE continues to promote the exchange as an attractive venue for new listings. "We expend considerable resources in ensuring that registered companies, whether family or privately or indeed government owned, are aware of the benefits of listing on the exchange. We recognize that issuers are attracted to liquid markets as it demonstrates strong market fundamentals, giving them the confidence to tap the market as a source of equity finance. Effective price discovery in a strong and liquid market provides a robust valuation mechanism for their businesses, which has a positive influence on the IPO pipeline and the breadth of the market", he said.
"We are also very active in providing education on investment matters to the community at large. We host numerous events throughout the year and invite a wide range of potential and existing investors to visit the exchange to gain firsthand knowledge of the market and the various products and services we offer. We consider this an important part of our responsibilities as an exchange to ensure that everyone can benefit from our economic growth by implementing an effective investment strategy. Our aim is to attract more investors to further improve market depth and diversify our investor base", he said.
 "We continue to develop and implement initiatives, in particular the liquidity provision regime, which have contributed to significant improvements in liquidity for certain stocks. To illustrate this, The Group Securities and Mannai Corporation entered into an LP agreement last year, which has resulted in a tenfold increase in average turnover of Mannai stock. This is particularly significant because Mannai is not one of the companies included in the MSCI Emerging Markets index and yet with this LP arrangement in place has been able to attract significant liquidity. We are expecting a number of similar deals with other listed companies to be announced soon", he added.
"Furthermore, we are continuing with our efforts, with the support of our regulators, to introduce other initiatives which are aimed at enhancing the market. Examples of this are securities lending and borrowing and margin trading", Al Mansoori said.
"Currently, securities lending and borrowing is allowed only for delivery versus payment (DVP) processing and liquidity provision. We are working with the regulators to further expand availability to professional investors, allowing them to gain additional income through lending their shares. This will also result in an increase in the market free float and provide additional trading opportunities for licensed investors".With the introduction of Margin trading, investors will be given the opportunity to increase the size and scope of their portfolios without having to tie up more of their capital. This will also improve market liquidity. Our product diversification strategy is simple; list products that provide access to markets outside Qatar and allow easier access to a broader range of asset classes within Qatar.
Al Mansoori concluded his speech saying: "We are working towards launching a number of ETFs which will provide access to emerging market debt and equities. We are also panning the introduction of ETFs that will allow investors to invest in all of the components of the QSE 20 index with a single trade. Sharia compliant products are also part of our product diversification strategy. We are currently working with a local asset manager to launch the largest sharia compliant ETF in the world. In addition to ETFs, we are also working with the regulators to list real estate investment funds (REITs) as we recognize that real estate is integral part of many investment portfolios in the region. These products will significantly add to the size of the market and allow us to attract new investors, further enhancing liquidity".