Strong earnings estimates take QSE to five-month high

DOHA: Qatar stocks benchmark index surged to an over five-month high yesterday on expectations of strong corporate earnings and strong oil. QSE was the top gainer within the GCC market, as the benchmark index closed 1.41 percent up at 9,395.81 points on the back of QNB, Industries Qatar (IQ) and QIB.

QNB jumped 2.17 percent as the bellwether IQ soared 2.11 percent and QIB advanced 2.76 percent. Ooredoo rose 2.08 percent and Commercial Bank added 1.50 percent. Vodafone Qatar was the top traded stock with trading 4.9 million shares.

Foreign institutional investors have taken cue from the market predictions that Qatar’s corporate earnings are expected to record solid results in the second quarter (Q2, 18).

The QNBFS, in its QSE Q2, 18 earnings preview released yesterday noted the Qatari stocks under its coverage is expected to grow by 23.9 percent year-on-year (YoY), driven by base effect but recede by 8.1 percent on quarter-on-quarter (QoQ). One year past the blockade, the aggregate earnings of Qatari stocks are expected to exhibit strong performance in the second quarter, QNBS analysts said.

In a note sent to The Peninsula, SICO Research said the aggregate earnings of Qatar’s listed companies are forecasted to pick up by 13 percent year-on-year in the second quarter. IQ’s bottomline is forecasted at QR1.2bn vs. QR513m YoY, up 73 percent, led by higher petrochemical product prices.

The Qatari Index has bounced back 20.1 percent from its lows reached on November 30, 2017 and is only down 1.9 percent from its pre-embargo level with a 14.3 percent growth on year-to-date.

QNBFS analysts said Industries Qatar, Commercial Bank and Qatar Navigation (QNNS) are estimated to contribute positively YoY to the aggregate bottom-line of stocks under coverage. For the time being, valuations are attractive vs the region’s forward price-to-earnings multiples and dividend yields remain superior to the region, they said.

Market recovery since mid-March has been driven by increased Foreign Ownership Limits (FOLs) and the resultant foreign flows led by QNB and are being sustained by improving oil prices. Medium-term, a lack of persistent catalysts and possible volatility due to prospects of a looming global trade war could act as impediments. Longer-term, we remain bullish on the Qatari stock market given attractive fundamental drivers and a significant spending program that should provide tailwinds for growth.

QNBFS estimates banks under its coverage, excluding QNB, to experience a YoY increase of 18.4 percent largely due to a base effect stemming from Commercial Bank. Excluding Commercial Bank, QNBFS estimates profitability to gain by only 3.3 percent, while the QoQ (-1.3 percent) decline is due to margin compression and soft non-funded revenue.

Commercial Bank is expected to contribute positively to the YoY/QoQ profitability performance based on our figures. QNBFS analysts expect Commercial Bank to report strong earnings in 2Q2018 after five weak quarters.

The first half of 2018 witnessed an upsurge in activity by foreign investors, with buying transactions increasing by 41 percent compared to the same period in 2017, reaching QR21.8bn. Sell transactions increased by 21 percent to a QR17.6bn.

Increases were largely attributed to the results of the periodic reviews by FTSE Russell and MSCI at the end of the first half of 2018.