What Every Investor Should Know About Qatar
Senior Editor, CNBC
Finding Qatar on a map may be as difficult as learning how to pronounce the country's name.
But analysts say that shouldn't stop investors from targeting the small desert nation—as long as they understand the business culture and the risks in a region erupting with political strife.
"Not many people know where Qatar is," says Joe Toms, managing director at the Lending Club, an online financial community of investors and borrowers. "But it has some opportunities for investors. It's just in a volatile area."
"They have enormous wealth and are sitting on huge reserves of natural gas and oil," says Timothy J. Pfister, a partner in the corporate department at the law firm Sullivan & Worcester. "So far, there has been no indication of political unrest. But there are intriguing undercurrents."
For investors who don't know, Qatar is a peninsula off the east coast of Saudi Arabia that juts out into the Persian Gulf. It's about the size of the U.S. state of Connecticut and ruled by a small group of sheikhs headed by an Emir, Hamad Bin Khallifa AlThani, and his family.
Qatar has a population of about 1.8 million people. It's largest trading partner is the U.S., which has a large military presence there. Major firms, like Chevron , ExxonMobil and Conoco Phillips have ongoing gas and oil development projects there.
Though its economy is mostly dominated by the public sector, Qatar is embracing more privatization of state-controlled enterprises, according to its ministry of foreign affairs. Qatar has had a stock market since 1997—the Qatar Exchange—with 44 regional companies now listed.
As for the pronunciation, Qatar is like the word 'cutter'—which is a holdover way of saying it from British rule that ended in 1968.
What should help investors learn the name by heart, analysts say, is Qatar's tremendous economic growth—based on its massive oil and gas reserves. In 2010, Qatar had the world's highest GDP per capita, while the economy grew by 19.4 percent, the fastest on the globe, according to the U.S. Commerce Department.
If not a household word now, Qatar will gain world wide attention when it hosts the FIFA 2022 World Cup—the popular international football (soccer) championship. Even though it's more than a decade away, Qatar is using the event to begin massive economic changes.
"The World Cup is a magnet for investment," says Pfister. "Because it's so hot there, in order to get the World Cup, they promised to build new air conditioned stadiums. So engineers, planners, construction crews, and all sorts of material will be vital now and in the coming years."
That inflow of investment into Qatar has already started, says Arti Sangar, a partner at the international law firm of Diaz, Reus & Targ.
"Economic growth in Qatar has spurred interest from a broader class of investors," says Sangar, who has dealt with private equity investments in the Middle East. "Besides infrastructure, there are opportunities in the financial sector as Qatar wants to be a regional hub for foreign financial institutions."
If Qatar is bursting with growth, how do market investors find ways to make profits? The options are a bit limited for now, say analysts.
"The Qatar stock exchange maintains a list of brokerage companies that do business in the country for those who want to trade directly," says Jeffrey Born, a professor at the College of Business Administration at Northeastern University. "There are also a few ETFs (exchange traded funds) trading on U.S. markets that have invested in securities listed on the Qatar exchange."
Investors should expect a rollercoaster ride when it comes to returns, says Born.
"The Qatar exchange has experienced some of the same up and downs as markets in the U.S.," Born explains. "But overall it is much more erratic. Investors should expect compensation for bearing risk but a lot of investors have been disappointed over the last five years."
Other options pose limitations as well, says Joe Toms.
"It's possible to buy Qatar government bonds," Toms explains. "But the problem is that none of this is easy, bonds or equities, nor are they very diversified. It might be better to look to Wall Street, where firms offer structured products that provide exposure to Qatar investments."
Toms adds that the small investor is at a disadvantage.
"Qatar is clearly geared more to the institutional investor—groups that pool their money like retirement or hedge funds," Toms goes on to say. "A retail investor could invest by using a full service brokerage firm that has access to the bonds and perhaps the equity market. But that will not be cheap and would be costly when it comes to profits."