Baghdad gets set for 'Big Bang' with a difference

Dodging the curse of the financial crisis that brought the global economy to its knees, Iraq's soaring stock exchange is about to experience its Big Bang.

Already up by about 30 per cent this year, as investors cash in on improved security and rock-bottom share prices, electronic trading is set to be introduced in a month, a move that investors hope will herald a new bonanza.

At present, mustachioed men in smart suits lean over a wooden barrier that rings the trading floor, squinting at a wall of whiteboards on which brokers scribble the price of stocks while jabbering into m.oblie p.hones or shouting to clients. This quaint trade in the shares of potentially one of the biggest economies in the Middle East was due to be phased out a year ago but delays in installing equipment and collecting shareholder information from the 91 listed companies foiled that plan.

Only now is the Baghdad bourse ready for its first wave of automation. Traders expect the new system to boost prices further. They are still recovering from their collapse after years of war. The cheapest stock is a dinar - a fraction of a penny - and the most expensive 100 dinar (6p).

Electronic trading will also help the market to expand. Five companies - three banks and two hotels - have already been suspended from manual transactions and should start to be traded electronically by mid-April. The other companies will move over during the course of the year.

Ultimately, the whiteboards will come down and trading will shift to an adjacent room of computers in lines of booths where stockbrokers will work. One investor, Rashid al-Waili, 64, is eagerly awaiting the revolution. “It will quicken the process of selling and buying,” he said. Current transactions take up to two weeks, while shareholder certificates are submitted to the company, verified and handed to the stock exchange. Electronic trading will complete the deal in five minutes.

Opened in June 2004 with funding and support from the US-led coalition, the bourse is Iraq's first independent stock market. During Saddam's time the old Baghdad stock exchange reported to the Ministry of Finance.

Its current market capitalisation is about $2 billion (1.4 billion), below its peak in 2005, but it has been clawing its way back in the past year.

Taha Ahmed Abdul Salam, chief E.xecutive of the Iraq Stock Exchange (ISX), said that Iraqi share prices were wiped out during the worst days of the sectarian conflict that gripped the country between 2005 and 2007.

Many investors sold stocks and fled overseas and trading was suspended for several months in 2006. A crackdown on the violence has helped to restore stability. The market is open again for business and interest is picking up. “In 2008 and this year, high liquidity returned and new liquidity came to buy shares, which makes demand for shares rise,” Mr Abdul Salam told The Times.

Foreign money is among the new liquidity, with two international funds buying and selling stocks. Interest from overseas remains limited, because Iraq's feuding parliament has yet to pass a securities law, which would offer greater protection and assurances for all investors.

Mr Abul Salam hopes that the only way is up, in terms of market size and value. “I believe in one or two years I will have more than 200[listed] companies,” he said. Trading time could also increase from two-hour sessions, three days a week, to 24-hour trading.

http://www.timesonline.co.uk/tol/new...cle5983256.ece