baghdad stock exchange moving into 21st century

Baghdad stock exchange set to share in digital age http://www.timesonline.co.uk/tol/news/world/iraq/article3075649.ece Deborah Haynes in Baghdad UK Times Newspaper December 20, 2007 Clutching a mobile phone to one ear, a stockbroker writes the price of a banking share in pen on one of many white boards that line the trading floor of the Iraq stock exchange. Behind him scores of suited traders, separated from him by a waist-high partition, squint at the boards trying to decide whether to buy or sell. “I am doing well. The prices go up sometimes, so I make money,” said Ahmed Said, 38, an investor, jostling for a good position from where to shout out his trades to a broker. By early next year this outdated trading scene will disappear as the exchange prepares to go electronic, creating a New York-style market. Bourse executives and brokers hope that the move, coupled with a new securities law, will attract more foreign and Iraqi investors, which will help share prices to recover fully from a large slide last year over security fears. The average price of a share in one of the 94 companies listed on the exchange is only 6 cents. “This is the perfect time to buy,” said Haitham Elias, a broker. “If the security situation improves, I think that stock prices will multiply by a factor of three or four,” he said, in between fielding phone calls from investors and scribbling share prices on the white board. June Reed, an American adviser to the stock exchange, said that the automation project took time to get off the ground because Washington had to sign off sufficient funding, the design had to be drawn up and also a new securities law needed to be drafted. These obstacles overcome, a set of large trading screens is due to be installed at the exchange in central Baghdad in the next few weeks. “Brokers will be able not only to trade electronically in the exchange but from their own offices. This is a model like Nasdaq,” said Ms Reed, who took time out from working as an investment banker in New York to spend the past 3½ years at the US Embassy in Baghdad as a senior adviser for private sector development. “Hopefully by the end of the first quarter [2008] everyone will take a look at the exchange again because it will be fully automated,” she said. Taha Ahmed Abdul Salam, chief executive of the bourse, said that electronic trading coupled with foreigners being able to invest in Iraqi shares since August meant that 2008 should be a good year for the market — Iraq’s first independent stock exchange. During Saddam Hussein’s time the old Baghdad stock exchange reported to the Ministry of Finance. Opened in June 2004 in a former restaurant owned by a Baghdad hotel, the new bourse was a far cry from the ultra-modern electronic trading platform that the US-led Coalition Provisional Authority had hoped to create within a few months. It had only 15 companies listed. By the end of 2005, however, it had grown in size and volume to a market capitalisation peak of just under $2 billion (£1 billion), before a wave of sectarian killing over the next 18 months caused many investors to flee. Trading was suspended for several months last year and the market plunged when it resumed. A marked fall in violence since the summer is reviving confidence, although this has yet to feed through to Iraqi stocks, which will end 2007 slightly down from January despite a pick-up in the number of investors and volume traded. Mr Abdul Salam and Ms Reed have high hopes for the future, as the improving security triggers growth in sectors such as banking, tourism and real estate. A trickle of foreign investors from the Middle East and the United States is already stirring interest among Iraqis with money, while a plan to open the bourse five days a week instead of the present three is also designed to increase business. “This is a nascent exchange and a relatively new and challenged economy so there is tremendous risk, but there is tremendous potential,” said Ms Reed. At present Iraq’s exchange in not a fair indicator of economic activity because banking stocks comprise 70 per cent of trades and manufacturing takes up 20 per cent and only about 50 companies’ shares are traded regularly.