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Qatar aims to slash shares' par value

Doha, November 7, 2013

The Qatar Financial Markets Authority (QFMA) has proposed cutting the par value of shares listed on the stock market to 1 riyal from 10 riyals, according to a document seen by Reuters, in a move that could boost market liquidity and make it easier to conduct IPOs.

The regulator sent the proposal to industry participants, market sources said. It was not clear when the reform might be introduced; officials at the QFMA could not be contacted to comment.

Qatar's market is thinly traded compared to some others in the region, such as those in the UAE. This makes it harder for companies to conduct initial public offers of shares; the last IPO occurred in 2010.

One reason for the thin trade is the high market prices of some shares in Qatar - Qatar National Bank's share price is around 165 riyals ($45.3), for example, compared to 5.5 dirhams ($1.5) for top Dubai bank Emirates NBD. High prices can mean large bid-ask spreads and small percentage movements in stocks, making them less attractive for smaller investors to trade.

Cutting shares' par value - their nominal value for accounting purposes - by a factor of 10 would increase the number of outstanding shares by that factor; this could be expected to reduce their market price by 90 percent, stimulating trade in them, the market sources said.

Qatari authorities have been taking a number of steps to energise and deepen the stock market, such as encouraging companies to raise limits on foreign ownership of their stocks. More foreign money is expected to enter the market next May when international index compiler MSCI implements a decision to upgrade Qatar to emerging from frontier market status.  - Reuters




Tags: Qatar | Shares |

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