The Wall Street Journal dedicated significant ink to the Iraqi Stock Exchange in September, saying that fund managers who track the exchange estimate that share prices have risen about 15 percent in 2011, making the ISX “one of the world’s best-performing markets.” (ISX officials claim that the exchange’s main market index has risen by 65 percent this year.) The report states that investors have been drawn to Iraq by the country’s “relative political stability” and the promise of higher oil revenues and the reconstruction of the economy. “Some adventurous fund managers” have started to explore opportunities in the small Iraqi market, according to the Journal. The report also compared Iraq favorably to stock exchanges in Saudi Arabia (down 7 percent this year) and Egypt (down 38 percent).

The influential newspaper’s report could become a self-fulfilling prophecy – the largely unknown Iraqi market’s profile will likely be raised somewhat, and new investors could be enticed by the Journal report. However, investing in the ISX remains a somewhat tricky proposition. Although foreign investment in the ISX has indeed increased, the volume of that investment amounted to only $72 million for the first five months of this year. Opportunities for investment are also rather limited, as the ISX listings are composed of a hodgepodge of Iraqi firms – largely a variety of local banks – with a total market capitalization of about $4 billion. (Egypt’s is $56 billion.) Only about 30 or 40 stocks are actively traded, according to the Journal, and few have enough liquidity that they can be bought or sold without significant disruptions in price. “We need more companies,” admitted Shwan Ibrahim Taha of Rabee Securities, a Baghdad-based brokerage. “The next 18-24 months are likely to see a lot more action on this front.”

Click here to read the WSJ article.

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Posted on Monday, September 26th, 2011 at 8:33 pm