U.S. markets closed

Blatter’s Bungles Could Spell Trouble for Qatar ETF


Now former FIFA President Sepp Blatter rocked the international football world Tuesday by announcing his resignation just days after Swiss authorities arrested seven senior FIFA officials.

As the FBI, Interpol, Swiss authorities and other law enforcement organizations weave through what could be one of the largest sports graft investigations ever, the iShares MSCI Qatar Capped ETF (QAT) could be primed for some punishment. [FIFA Scandal Plagues Qatar ETF]

For now, Qatar remains the host of the 2022 World Cup, but the OPEC member’s grasp on those hosting duties is tenuous now that Blatter has been sent packing. The international football community was stunned in December 2010 when FIFA awarded Qatar the 2022 World Cup. Questions surrounding that decision were, and still are, logical. After all, the World Cup is played entirely outdoors and during summer months, making a nation located in a desert region a curious choice to host an event of this nature.

The plan has been to move World Cup 2022 to the wintertime, but that may not be necessary because the country could lose its hosting privileges with Blatter, a strident defender of Qatar World Cup 2022, out the door.

“Insiders say the leaders of Qatar’s 2022 Supreme Committee (or local organising committee) have now been told not to set foot on U.S. soil for fear of being arrested by the FBI in its investigation into allegations that FIFA officials turned football into a ‘criminal enterprise’ and presided over a ‘World Cup of fraud,’” reports Heidi Blake for BuzzFeed.

To be fair, QAT, the lone dedicated Qatar exchange traded fund, has endured the FIFA flap. Sort of. The ETF is up nearly 2.1% over the past week. However, QAT is down almost 3% since May 13 when ESPN aired a documentary claiming Blatter refused to travel to the U.S. for fear he’d be questioned regarding the award of the 2018 and 2022 World Cup finals. Russia is slated to host the tournament in 2018.

The $51.5 million QAT is not even 14 months old, so the ETF was not around when FIFA decided to award Qatar the 2022 World Cup. That does not mean the ETF is not vulnerable to Qatar potentially losing its coveted hosting duties.

The bulk of the market value for Qatar’s equity market is held by banks and real estate firms, companies expected to benefit from the World Cup. QAT reflects as much with a 56.4% weight to the financial services sector. Throw in a 13.4% weight to industrials, which could benefit from World Cup-related building projects, and it is impossible to say QAT would not be in for some downside if Qatar loses the World Cup. [Catalysts for the Qatar ETF]

There is some precedent for how QAT and Qatar-heavy ETFs could react if Qatar’s hosting privileges are revoked. For the month after FIFA awarded the World Cup to Qatar in December 2010, the WisdomTree Middle East Dividend Fund (GULF) rose more than 6% while the Market Vectors Gulf States Index ETF (MES) gained nearly 5%.

GULF and MES have Qatar weights of 33.7% and 23.9%, respectively.

iShares MSCI Qatar Capped ETF