How Large Are the Positions That Funds Have Liquidated In Qatari ETFs? 2

Foreign investors are exiting Qatar

Foreign investors have been liquidating positions in Qatari (QAT) stocks since diplomatic relations with major Middle East countries turned sour. According to Qatar bourse data, non-Qatari Gulf shareholders constitute 5-10% of the equity market’s turnover and if they exit the market, it would equate to huge outflows from the country. Qatar’s huge financial reserves could help in such troubled times but only for a short period of time. If this crisis persists for longer, it will impact all sectors of the economy including merchandise trade and banks. If commercial banks in other Gulf countries are advised by authorities to exit their exposure to Qatari assets it would bring turmoil to Qatar’s money markets. Fund managers expect the Qatari government to intervene to support the market as Qatari stocks are constituents of several emerging market indices and have large foreign holdings.

“Overall, it still boils down for investors (abroad) that it is still an oil story – with oil at $45-50, most of the countries will be able to muddle through, and I think another collapse below $40 would raise risks more,” said Win Thin, global head of emerging-market currency strategy at Brown Brothers Harriman in London.

Among the exchange traded funds investing in Qatari equities, the iShares MSCI Qatar Capped ETF (QAT) has seen the highest outflows YTD amounting to $5.7 million. In 2016, however, the QAT ETF has witnessed inflows of $5.1 million. The Wisdom Tree Middle East Dividend ETF (GULF) has seen outflows of $1.8 million YTD and $4.9 million in 2016. In comparison, investors have pulled out $3.2 million from the SPDR S&P Middle East and Africa ETF (GAF) in 2017 so far.

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