Qatar’s planned initial public offering bonanza may be socially driven but it looks a bit ambitious from a financial standpoint. The Gulf emirate is planning a wave of new listings on the local exchange. The aim is to increase the private sector and give Qatari nationals a chance to participate in the country’s global financial expansion. It may also be a way to modernize the traditional relationship between the absolute monarchy and its citizens.
The sovereign wealth fund Qatar Holding is spinning off assets to create a new $12 billion investment firm, Doha Global Investment. Another firm, Infrastructure Investment, is expected to be marketed as a play on the $120 billion worth of spending the emirate is planning for the 2022 football World Cup. Finally, according to sources, Qatar Petroleum is preparing to spin off a number of assets in an offering.
The I.P.O. wave is also intended to foster a more responsible spending culture among the nationals of one of the richest countries in the wold. The government provides free education and health care, but three-quarters of its citizens still have large debts, mostly over $70,000, according to a government report. Instead of increasing savings, the emirate’s infamous public-sector salary increases keep luxury-car dealers busy and fuel inflation.
The listings will go some way to stave off any mumblings that the tiny local population of around 250,000 isn’t sharing the benefits of the state’s spending on everything from the luxury department store Harrods to Egypt. Qataris are not unhappy, but in the post-Arab Spring era, monarchs across the gulf are anxious to give their citizens less reasons to complain.
However, with privately owned companies also eying the market, there are concerns that Qatar won’t be able to absorb all the new issues. The stock exchange has a total market capitalization of $130 billion, but liquidity among the 40-odd stocks is poor, and the free floats tiny. What’s more, the emirate’s most recen! t stock issues haven’t gone well. Shares in Vodafone Qatar, which floated in 2009, trade at a 14 percent discount to its offer price.
At some point the emirate may realize that there are also other ways than the stock exchange to tackle its social issues.
Una Galani is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
