MSCI may shift to offshore rates for Qatari riyal

A cashier counts Qatari riyal notes at a money changer in Doha. (File photo: Reuters)

Dealing another blow to Qatar’s smug façade of business as usual, the equity index compiler MSCI said on Wednesday that sanctions against Doha had made it more difficult for investors to obtain riyals.

MSCI also said on Wednesday that it might therefore shift to using offshore rates to value Qatar’s equities market. Since the riyal offshore often trades several percent weaker against the US dollar than onshore, the shift could lead to changes in the weighting of Qatari stocks in MSCI’s emerging market index.

The index compiler said it will take feedback from the investment community on the proposed shift until December 1, and will announce its final decision by December 5.

The prospect of a shift pushed Qatar’s stock market down 0.7 percent on Thursday.

The boycott by the four Arab and Gulf countries - Saudi Arabia, the United Arab Emirates, Bahrain and Egypt - which cut diplomatic and transport ties with Qatar in June, promptied many Gulf and other foreign banks to reduce their business with Qatari banks.

This has distorted the foreign exchange market, where onshore and offshore rates have diverged.

Commercial bankers say liquidity in the foreign exchange market has suffered partly because the central bank and big state-owned Qatari banks have become reluctant to provide currencies when they believe the supply might be used for speculation against the riyal.

Qatar’s central bank sought to reassure foreign investors on Thursday that they could change currencies freely, after

After the close of the market on Thursday, the Qatar central bank issued a statement saying it was committed to providing all the currency requirements of investors, including local and foreign individuals and institutions, at the official exchange rates.

“There are no restrictions on all banking transactions including transfers,” it said.

Last Update: Wednesday, 20 May 2020 KSA 09:49 - GMT 06:49