Change in Settlement Cycle Will Spur Qatar Debt Market

Doha, June 30 (QNA) - The proposed change in the settlement cycle from T+3 to T+1 for government securities will spur the debt market in Qatar, a Qatar Exchange executive said here Sunday. "We believe that the change from a T+3 to T+1 settlement cycle for government securities would also benefit the market once approved," Qatar Exchange (QE) Programme Manager Roger Warnock told Qatar News Agency (QNA). T+3, abbreviation for trade plus three days, means when a security is purchased, payment and the securities certificate will change hands three business days after the trade is executed. QE is currently on an upswing with index compiler Morgan Stanley Capital International (MSCI) recently upgrading the Qatari bourse' status to Emerging Market from Frontier Market. Reiterating this Warnock said, "These are exciting times for Qatar Exchange. We have expanded our sphere of trading instruments with the introduction of government bonds on June 18. This further develops the capital market in Qatar. The Exchange also expects to list bonds issued by Qatari corporations, as and when they become available. These developments augur well for Qatar." As part of its ongoing campaign to promote awareness among investors, the QE organized here last week an educational seminar aimed at foreign investors on the nitty-gritty of bond market, investment advantages, pricing mechanism, and yield calculations. At the seminar Warnock made a presentation on the importance of such investments tools as one of the products offered for trading on the QE along with stocks. These bonds, traded through brokerage firms and priced on the mechanism of supply and demand, provide protection for investors' portfolios by giving them the ability to diversify risk as bonds are deemed to carry less risk and provide safe periodic income, he told the seminar comprising around 70 attendees. "Bond prices are influenced by prevailing market interest rates and will usually go up if there is a decrease in those rates, adding that bond prices are inversely proportional to yield, and capital gains can be made if interest rates should fall," he said. Regarding the regulatory environment in Qatar, he said, it is favourable for bond market growth. "Qatari companies have issued bonds in the Eurobond market and we would expect that they will tap the Qatari market in due course. The Central Bank has made it clear that they are very keen to develop the Qatari Riyal yield curve, to aid in the pricing of new issues and for the valuation of bond holdings," he said. Replying to a QNA question on whether a coupon (interest payable by bond issuer on the money borrowed from investors) rate of between 2.5% to 3% attractive for investors who are looking for higher yields It is up to the issuer to determine the coupon, while the market forces of supply and demand will determine the market yield, he said, "Comparing coupons with other bonds is not always straightforward as one need to take into account factors like currency risks, inflation, and rating of the issuer, liquidity and so forth. Having said that, when compared to government bonds issued in other markets, the current rates are competitive, particularly for these short maturities," said Warnock. (QNA)