x Abu Dhabi, UAEThursday 18 January 2018

Investment funds look inwards

Qatar's government investment vehicles are making increasing investments in their home economy, defying the traditional dictum of where sovereign wealth funds should invest.

As a steady stream of Qatari economic figures show signs of slowing growth, Qatar's state investment vehicles are turning their vast capital reserves inwards.

Last month, the Qatar Investment Authority, which typically invests in assets overseas to prevent additional liquidity from gas receipts from flooding the local market, said it was preparing to buy into Qatar Insurance Company (QIC), a local firm.

The insurer said its board had approved the sale of 7,755,574 shares to Qatar Holding at an implied total cost of US$134.1 million (Dh492.5m), which it said would increase the firm's capital by $21.3m.

The move was made "to take advantage of the economic strength of Qatar Holding, as a strategic partner in strengthening investor confidence in the shares of QIC, strengthen its financial position to contribute its future plans, install its regional presence and confirm their survival in the competition between the major insurance companies at the regional and international levels," QIC said in a statement to the Qatar Exchange.

Gulf International Services, an oilfield services company, also agreed to allow the Qatari General Retirement and Pension Authority to take a 21.4 per cent stake in the company, increasing from a current 1.4 per cent through a purchase of shares from Qatar Petroleum.

Not all Qatari companies are seeking funding from the country's government investors. Industries Qatar and Qatar Cement have both upped their limits on share purchases by international investors during the past few months.

Signs of strain can be found across Qatar's economy, even if they are manageable for now. Loans at Qatari banks represented 112 per cent of deposits at the end of September. Although the rate has improved from a peak of 121.8 per cent in June, banks remain overextended and dependent on interbank lending. Equity outflows by international investors have totalled $588m so far this year, more than offsetting inflows into markets in the rest of the Middle East, says Deutsche Bank.