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A Deeper Look At The Qatar ETF

Tuesday, November 8, 2016 10:09
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Qatar has been in the headlines recently, in tandem with WikiLeaks/DNC developments heading into today’s U.S. Presidential election in terms of possible donations to the Clinton Foundation — as well as potentially providing clandestine support historically for ISIS.

While these unconfirmed stories are likely to be fleshed out further in time, there is an ETF that tracks the country of Qatar itself that surely flies under most radars, judging from trading volume historically. QAT (iShares MSCI Qatar Capped, Expense Ratio 0.61%) debuted in late April of 2014, and has raised about $40 million since inception.

Trading volume in the product has actually tailed off in recent months in spite of the country’s increased visibility in headlines. We see a three month trailing ADV of about 18,400 shares in the product, but a one month trailing ADV of only about 7,800 shares, and this all comes on notable weakness in the underlying.

The fund itself is significantly lower today from its mid-August highs, to the tune of more than 10%, and there really has been only one notable day of significant block volume in late September, where nearly 500,000 shares exchanged hands in one session. QAT is actually trading at its lowest levels since mid-July, where a short lived rally in the country based ETF petered out sometime in September.

Fund flows in the product have been nearly exactly flat year-to-date when examining net creation/redemption activity in 2016. As one might expect, the Qatar local market is not incredibly deep in terms of publicly listed companies, and thus QAT only has exposure to twenty-eight individual names, with the highest sector exposures belonging to Financial Services by a large margin (48% of the portfolio), and followed by Real Estate (14%), and Basic Materials (13%) ahead of lesser sectors throughout the remainder of the underlying basket.

Top individual equity exposures are as follows: 1) Qatar National Bank SAQ (21.37%), 2) Industries Qatar QSC (9.34%), 3) Masraf Al Rayan QSC (7.37%), 4) Ezdan Holding Group (7.27%), and 5) Qatar Insurance Company SAQ (4.63%). Clearly, there is a significant overweight to the top holding in the portfolio, comprising >21% of the overall ETF in terms of exposure.

QAT is actually the second largest “Middle East” focused ETF presently in the U.S. listed landscape, behind EIS (iShares MSCI Israel Capped, Expense Ratio 0.62%, $87.5 million in AUM) and ahead of UAE (iShares MSCI UAE Capped, Expense Ratio 0.62%, $39.9 million in AUM).

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch
paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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