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 Insulated from woes, Iraqi stocks soar

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RR Phantom

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Insulated from woes, Iraqi stocks soar Vide
PostSubject: Insulated from woes, Iraqi stocks soar   Insulated from woes, Iraqi stocks soar Icon_minitimeSun Oct 12, 2008 9:01 pm

While the rest of the world is facing a financial meltdown, the Iraq Stock Exchange is booming.

The ISX index soared nearly 40 per cent during September, boosted by increasing confidence in security gains.

But the stock market's chief isn't gloating. He's worried Iraq's greatest asset - oil - could prove to be its Achilles' heel.

"I believe we're still far from what's happening in the world in the financial markets. But in the end you must know we are part of this world. I believe somehow we will have some problems," chief executive officer Taha Abdul-Salam said Sunday during an interview in his office above the busy trading floor.

Iraq is in a unique position since its post-war economy is in the rebuilding process and still largely dependent on US funds instead of international investment. That's reflected in the stock market, which only has 95 Iraqi companies listed and a daily volume of $US1 million ($A1.46 million) to $US2 million ($A2.93 million).

"I don't think that the current financial crisis will hurt our economy and especially this market because we are not connected to any of the global markets and we have very few foreign investors," said Omar Mouwaffak, a 73-year-old trader. "It is still a small, local market."

Mouwaffak was one of dozens of investors and brokers crowding the floor Sunday as daily market activity was updated with coloured markers and erasers on white bulletin boards in lieu of computers.

"We still trade in the manual way," Abdul-Salam said, noting that limits the number of deals. "If you have electronic trading, you will make hundreds of transactions."

The exchange, which began to allow foreign investors in August 2007, also is only open three days a week from 10am to 12pm. It is regulated by the Iraq Securities Commission, which was modelled on its US counterpart.

Promoted by US authorities, the independent Iraq Stock Exchange opened in June 2004 to replace the defunct Saddam Hussein-era Baghdad Stock Exchange, which was riddled with corruption.

It saw brisk trading in the beginning, with $US10 million changing hands on a single day, but business tapered off as violence spiked and affluent Iraqis fled to neighbouring countries, taking their money with them.

Abdul-Salam, who has a Master's degree in economics from Baghdad University and speaks English, sees an opportunity to get them back - stressing that plans are under way to implement electronic trading.

"Those who ran away, we are trying to convince them that you must get back because we have good security now in Iraq. We are trying to build the country," he said.

He said foreigners, including Americans, Britons and investors from regional countries, comprise less than 3 per cent of the average volume.

Salam Hassan Jawad, a 44-year-old father of two, said the market turmoil could even attract more foreigners.

"I think that some foreign investors who are afraid to pump their money in the affected economies will pump their money in here, though not necessarily huge amounts," he said, standing in the hall with two mobile phones in his hands.

Abdul-Salam said the biggest sector remains banking but growth in hotels is driving up the overall index.

"Since September, the index going up because there is high demand in buying hotel shares," he said. "The other sectors didn't face any losses in their prices so the index is going up."

Abdul-Salam also hopes to draw more foreign investment once the switch to electronic trading is complete.

"There are many funds thinking to invest here in Iraq. They send emails, they contact my brokers. They like to collect information," he added. "But some of those funds are waiting for the automation because they like to invest in the international way."

But he's worried dropping oil prices, which have plunged nearly 50 per cent from a summertime high of close to $150 per barrel, will force Iraq to readjust its projected US$79 billion budget surplus.

"I believe all our plans for the Iraqi economy will maybe take some damage or some problems because we were expecting some numbers. Now we must replan," he said. "Oil is the first and the highest product that we are depending on for our work, for our plans, for our investment, for our rebuilding."

Oil Ministry spokesman Assem Jihad acknowledged that Iraq's economy is heavily dependent on oil and said authorities were watching the market carefully.

"We will wait until everything is clear to decide whether we need to adjust the average price of the oil barrel that we recommended for the next year," he said.

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