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Satyendra Pathak
The QNB Financial Services (QNBFS) on Sunday said that it expects Qatari stocks under coverage to exhibit a sequential recovery in earnings on a normalised basis in the third quarter of this year.
“Normalised earnings should increase by 9.1 percent quarter-on-quarter (QoQ) in aggregate mainly due to partial recovery of non-financial stocks as a result of the gradual lifting of coronavirus counter measures since July, coupled with the recovery in commodity prices,” QNBFS said in a report released on Sunday.
“Industries Qatar, Aamal and Woqod should make notable positive contributions to the sequential net income performance of stocks under our coverage, whereas we expect Qamco to benefit from higher aluminium prices prevailing in the third quarter of 2020,” the report said.
Consumer-related companies are likely to be supported by Qatar’s larger population in the third quarter of 2020, which is 0.8 percent above its third-quarter average in 2019.
“We continue to remain bullish longer-term on Qatari stocks given their defensive characteristics backed by their strong fundamentals and reasonable valuations. We also maintain our view that the coronavirus malaise will impact Qatari equities to a lesser extent against their regional peers, as has been the case since the beginning of 2020. So far, YTD, the decline for the QE Index has been 4.7 percent, outperforming the average 10.1 percent decline seen in other GCC stock markets,” the report said.
On top of Qatar’s macro strengths, it said, Qatari companies enjoy robust balance sheets backed with low leverage and decent RoEs, whereas Qatari banks stand out with their exceptional capital adequacy ratios, low NPLs, strong provision coverage, and high profitability.
“We anticipate Qatari banks to remain resilient, recording a 1.8 percent EPS growth sequentially. Moreover, the proposed merger announcement between Masraf Al Rayan and Al Khalij Commercial Bank should create a positive catalyst for Qatari banks and fuel investor interest in the sector,” the report said.
“In case of any unforeseen volatility, Qatar government’s QR10 billion stock purchase programme creates an important safety net for Qatari stocks,” it said.
“With coronavirus continuing to impact the real economy, global emerging market equities as well as Qatari stocks could remain volatile. On the other hand, we still believe this market will continue to outperform on a relative basis, as it has thus far this year,” the
report said.
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