By Neil MacDonald
Financial Times, 04 December 2005.
After more than a year in makeshift lodgings, the Iraq Stock Exchange (ISX) on Sunday celebrated its official opening. Even with the surrounding blast walls painted a matching cream, the newly built sandstone building in south-east Baghdad looks more like a neighbourhood bank or hotel than a key national financial institution.
But its brokers hope the ISX will help spur the recovery of Iraq’s devastated industrial economy. Private-sector financial mechanisms – the stock market and the undersized private banking system – will be vital to support sustainable reconstruction, US officials say.
“This is an essential institution for making the economy more dynamic and creating investment opportunities,” Saddoun Kubba, chairman of the Commercial Bank of Iraq, said on Sunday.
The ISX picked up the reins from the former Baghdad Stock Exchange, created to sell off state-owned industries as Saddam Hussein’s regime felt the squeeze of international sanctions. Trading on the old exchange ceased on the eve of the US-led invasion 2½ years ago.
At first, US advisers derided the old system of white boards and markers as an example of economic backwardness. But as the Americans struggled to organise a state-of-the-art electronic trading floor, Iraqi shareholders grew anxious about frozen assets, Iraqi brokers said.
In June 2004, the ISX opened temporarily inside a former hotel restaurant, with only 15 companies listed and total trading for the month worth just 3.6bn Iraqi dinars ($2.5m). Listed companies now number more than 80, and the monthly value traded regularly tops 20bn dinars, ($13.6m, £7.8m, €11.6m). A flurry of speculation on local banking stocks this year put monthly trades in the range of 45bn dinars.
The move to a permanent home comes with scaled-down expectations. Instead of electronic touch-screens, brokers must still shout out their bids to officials manning the white boards at the front of the room.
Iraqi finance officials say they urged the Americans to let go of high-tech dreams and just allow the exchange to carry on with business. “It works exactly like the old stock exchange,” said Munther al-Fettal, ISX board member. “It’s clear and practical. For getting deals done, it works just fine.” Still, the volumes traded are paltry by regional or world standards.
With Iraq’s manufacturing industries mostly stagnant, banking shares have been the most active. Partnership agreements with foreign banks, including the British giant HSBC and Gulf Arab banks, drove bank shares sky-high several months ago. But the prices soon fell again, with some brokers blaming uncertainly over government intentions.
Despite an investment law that says foreigners can buy Iraqi companies, Iraq’s securities regulator has failed to issue rules whereby they can invest through the ISX.
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Citation: Neil MacDonald. "Iraq stock exchange hopes to spark recovery," Financial Times, 04 December 2005.
Original URL: http://news.ft.com/cms/s/be37ead4-64f0-11da-8cff-0000779e2340,ft_acl=,s01=1.html
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