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By Tom Finn
DOHA, Oct 10 (Reuters) - Qatari banks Masraf Al Rayan and Doha Bank plan to launch the Gulf state's first exchange-traded funds (ETFs) by the end of 2016, a move that should boost capital flows into the local stock market, a bourse official said.
The launch of ETFs - portfolios of stocks that track an index - could boost a market that has been pressured in recent months by low natural gas prices and limited liquidity.
"We expect both (ETFs) to launch by the end of the year," a Qatar Exchange official told Reuters, declining to be named as he was not authorised to talk publicly. He did not give further details.
Spokespeople for Doha Bank and Masraf Al Rayan confirmed that ETFs were being pursued but declined to comment on any specific timeframe.
Since they involve low management costs and trade on exchanges, ETFs can give foreign investors a cheap, convenient route into emerging markets.
"ETFs are now a $4 trillion asset class globally, so global investors understand them well. As with any new product, local investors will rightly take their time to gain comfort and understand the advantages and uses," said Akber Khan, director of Asset Management at Qatar's Al Rayan Investment.
While not the most illiquid stock market in the Middle East, Qatar struggles to generate large trading volumes, a problem exacerbated by big government holdings in many companies. Last week the exchange introduced margin trading in an effort to boost liquidity. (Editing by Andrew Torchia and Angus MacSwan)