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.
“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.
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 organised here last week an educational seminar aimed at foreign investors.
“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 question on whether a coupon (interest payable by bond issuer on the money borrowed from investors) rate of between 2.5 percent to three percent attractive for investors who are looking for higher yields, he said: “It is up to the issuer to determine the coupon, while the market forces of supply and demand will determine the market yield”.
“Comparing coupons with other bonds is not always straightforward as one needs to take into account factors like currency risks, inflation, 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.
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