The Qatar Stock Exchange (QSE) carried out its first domestic securities lending and borrowing (SLB) transaction in May as part of its strategy to raise market liquidity. The move marked an important development for the QSE, as it looks to increase market and product sophistication, depth, and securities lending.
HSBC acted as custodian and agent-lender while QNB Financial Services (QNBFS) acted as the borrower. The QSE worked with Edaa, the licensed service provider under the Qatar Financial Market Authority that provides a range of essential services related to securities and financial instruments.
Hussein Fakhreddine, CEO at Qatari investment bank QInvest, said, “The transaction marks a milestone under the Financial Strategic Plan, which is part of the Qatar National Vision 2030, allowing more sophisticated investment strategies and unlocking a significant liquidity pool.”
QNBFS plans to offer this service to qualified investor clients that can benefit from new trading strategies on the QSE that were not possible before, according to Maha Al Sulaiti, Acting CEO at QNBFS. When demand for such transactions increase, it expects a commensurate growth in market volumes and liquidity.
QNBFS Chairman Adel Abdulaziz Khashabi said, “It’s important to note that SLB is one part of several key initiatives championed by the QSE to enhance the size and liquidity of Qatar’s equity market. Such initiatives include encouraging new listings via IPOs and direct listings, the most recent example being the successful listing of Techno Q on the Venture Market. We expect further IPOs and listings to stimulate demand and market activity. Going forward, introduction of a derivatives market should further stimulate market activity and bolster our appeal to institutional investors.”
QInvest is also looking to boost its activities and has aligned its investment banking advisory services consistent with Qatar’s 2030 vision for the financial sector. Fakhreddine said, “We are, and will continue to be, active in the securities market in the form of active mergers and acquisitions, as well as equity and debt capital market transactions.”
The Qatar Investment Authority has allocated QAR1 billion ($275 million) for a permanent market-making program at the QSE. Fakhreddine said, “This program aims to enhance market liquidity, improve price discovery, and diversify capital markets, thus attracting more foreign investments and boosting investor confidence.” The initiative is set to run for the next five years.
The development of SLB activities alongside other market initiatives will provide traders and investors with access to more sophisticated investment strategies, hedging mechanisms and securities financing. It is likely to attract new investors in the Qatari market and deepen the investment pool.