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Qatari stocks expected to exhibit earnings recovery in Q4: QNBFS

Qatari stocks expected to exhibit 
earnings recovery in Q4: QNBFS

Satyendra Pathak
Doha
Qatari stocks are expected to exhibit a sequential recovery in earnings on a normalised basis in the fourth quarter of 2020, QNB Financial Services (QNBFS) has said in its latest report.
“Normalised earnings should increase by 7.1 percent quarter-on-quarter (QoQ) in aggregate mainly due to the recovery in non-financial stocks helped by the progressive lifting of coronavirus counter-measures since July, coupled with a further recovery in commodity prices,” the report said.
“Industries Qatar (IQ), Commercial Bank of Qatar (CBQ) and Qatar Aluminum Manufacturing Company (QAMCO) should make notable positive contributions to the sequential net income performance of stocks under our coverage,” QNBFS said in the report.
“We continue to remain bullish longer-term on Qatari stocks given their defensive characteristics backed by their strong fundamentals and reasonable valuation. Moreover, the lifting of the blockade is positive for Qatar and the region. While Qatari equities faced declines initially in 2017 due to the blockade, in time it became clear that the blockade did not have a noteworthy impact on Qatar’s economic life. Consequently, Qatari equities staged a strong comeback in 2018. Infrastructure projects related to the FIFA 2022 World Cup and the 2030 Qatar National Vision investments have continued to be major growth drivers for local companies during 2017-2020. Currently, the QSE general index is trading 9.3 percent above its pre-blockade level,” the report said.
On top of Qatar’s macro strengths, the report 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.
“In case of any unforeseen volatility, the government’s QR10 billion stock purchase programme creates an important safety net for Qatari stocks. 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,” the report said.
“We estimate banks under coverage to experience flat earnings year-on-year (YoY) largely attributed to Commercial Bank as it’s expected to report a large YoY decline in earnings. Excluding Commercial Bank, aggregate bank earnings could increase by 8.9 percent YoY. Moreover, we expect a sequential decrease of 12.5 percent as banks book higher provisions in the fourth quarter. For banks under coverage, we expect lower provisions and impairments and softer revenue on a YoY basis,” the report said.

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