Will foreign capital venture into ISX, March 15, 2007


The Iraq Stock Exchange is to open its doors soon for foreign investors after a long wait according to unconfirmed reports. Quoting the head of the Iraqi Securities Commission, the governmental regulatory body that overseas the activities of the small exchange which was opened in the summer of 2004, the commission has just approved moves to allow non Iraqi investors to buy and sell stocks of listed companies trading in the exchange.


Investors will have to acquire brokerage services through one of the 40 or so licensed brokers in the exchange, he said. These brokerage companies will open accounts for clients upon the delivery of normal identification credentials such as passport copies in addition to residence details and other customary information. Money transfers to fund these accounts will have to be carried out exclusively via the international banking system.


The Iraq Stock Exchange with a capitalization value of just over $1 billion has some 80 joint stock companies listed whose shares are traded twice weekly. Joint stock companies issue only one type of ‘common” stock conferring on the holder the right of voting in general assemblies and a share in the net profits of the company. There are two types of listed companies. Wholly privately owned companies as well as companies where the state still maintains up to 25% holding. The latter are primarily found in light manufacturing originating in state owned enterprises that where partially privatized in the late 1980s. Listed stocks include banking, manufacturing, agricultural, real estate, tourism and services sectors. Before 2003 the manufacturing sector dominated turnover but in more recent times banking has become the leading sector.


The exchange has never been open to foreign traders before. Earlier plans to liberalize the market following the foreign investment legislation, order 39 of 2003, by the now defunct Coalition Provisional Authority was never implemented. More recently the Iraqi Parliament endorsed a new Foreign Investment Legislation which explicitly opened up the capital market of Iraq to foreign investment.


Rumors of the imminent move to open the exchange for foreign investment have revived hopes in the depressed market leading to a significant rally in recent trade. Due to the consistently deteriorating security conditions, a stagnant economy and a very hostile business environment the exchange lost over the last two years some two thirds of its peak capitalization value. The new “Surge” to restore some degree of order to Baghdad together with the implementation of the foreign investment law, and the on going plans to introduce automation may all combine to bring much awaited recovery into the Iraqi bourse. It remains to be seen if the move will actually translate into any sizable influx of funds into the capital hungry market.

Housing Bank, main branch, Amman, Jordan