(Adds analysis, market reaction)
By Amena Bakr and Andrew Torchia
DOHA/DUBAI Aug 6 Qatar's emir has issued a law
providing for foreign investors to own up to 49 percent of
listed Qatari companies, part of reforms to expand the stock
market and develop the financial industry.
"The law 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," the official Qatar News
Agency (QNA) said on Wednesday.
Originally announced in late May, the law also lets
foreigners own more than 49 percent of a firm in special cases
if they obtain approval from the Qatari cabinet.
In another market-opening step, citizens of the six-nation
Gulf Cooperation Council will be treated as Qatari citizens for
the purpose of owning firms listed on the Qatar Exchange. This
will provide more room for non-GCC foreigners to own shares.
Currently, listed Qatari firms impose ceilings on combined
foreign ownership that are usually no more than 25 percent,
though some have already raised their ceilings above that level.
Al Khaliji Commercial Bank said in February, for
example, that its shareholders had approved an increase in its
foreign ownership ceiling to 49 percent.
It was not immediately clear from the QNA report whether all
Qatari firms would now be obliged to raise their ceilings to 49
percent, or how much time they would have to do so. Officials
could not be reached to clarify the issue on Wednesday.
"We have not been informed by the regulators on how this law
will be implemented. We have been waiting for someone to explain
since May, but so far we don't know if it will be mandatory to
raise investment to 49 percent," said a Western bank executive,
declining to be named because of the sensitivity of the matter.
QNA said companies would need the approval of the Ministry
of Economy and Commerce for increases to their foreign ownership
ceilings in their articles of association. This may mean the
ministry could specify ceilings below 49 percent in some cases.
At present, foreign investment in most listed Qatari
companies is not near their current ceilings, and even if
investors are allowed to accumulate large stakes, it is not
clear they will want to do so in a market which lacks the
liquidity of bigger stock markets.
The free floats of many major Qatari firms are limited by
large stakes held by the government; for example the Qatari
state owns 43 percent of Qatar National Bank,
according to Thomson Reuters data.
Nevertheless, the reform may help in the long run to attract
more foreign money into the Qatar Exchange, which with a
capitalisation of $193 billion is the second largest bourse in
the GCC, after Saudi Arabia.
Qatar's market has risen strongly this year on the back of
its upgrade in May by international index compiler MSCI to
emerging market status from frontier market status. The main
index, down 0.2 percent in afternoon trade on Wednesday,
is up 27 percent year-to-date.
"It's a step in the right direction, but it will have to be
backed up by good performance from companies in order to attract
foreign investment," one wealth manager in the Gulf said of the
"There should be limited impact from the law in the short
term due to liquidity issues and limited numbers of shares
Saudi Arabia, which has a market nearly three times the size
of Qatar's, announced last month that it would open its bourse
to direct investment by foreign institutions in the first half
of next year.
(With additional reporting by Nadia Saleem in Dubai)