Amid Iraq troubles, an exchange signals potential for growth

Baghdad: It's not exactly Wall Street. In rows of black chairs, elderly men sit chatting, casting the occasional glance at projection screens displaying the latest market movements on the Iraq Stock Exchange.

Occasionally, one gets up and wanders to the back of the darkened room, by the glass divider behind which the brokers sit. There's no one screaming orders or waving a fistful of tickets.

The relative inactivity stands in stark contrast to the hopes Iraqi and American officials had when the US-backed exchange was reborn in 2004.

Back then, expectations were that the toppling of Saddam Hussain a year earlier and the country's reabsorption into the international community would bring with it an economic reflourishing, and the bourse was touted as a tool to tap into the country's potential.

Skittish investors

Instead, political deadlock and security fears have left foreign investors skittish about pumping money into Iraq, even though tens of billions of dollars are needed to rebuild everything from a dilapidated infrastructure to the private sector.

Unemployment remains high, as does inflation, though it is far below the over 60 per cent level seen just a few years ago.

And the stock market, a key economic engine in most major economies, remains another item in a list of postwar Iraq's unrealised hopes.

At the time of its launch, just over a dozen companies were listed on white boards hanging on the trading floor, located in a Baghdad hotel restaurant. Officials at the time projected that within a month, it would have 120 companies listed.

Six years later, only 85 companies are listed.

Its successes have been relative. It has moved into its own building. Instead of two trading sessions per week, it's up to a full five days. Most importantly, an electronic trading system has replaced the white boards.

"Every night, before I go to sleep, I thank God that I managed ... for the first time in the history of the Iraqi exchange, to introduce electronic trading," said Taha Abdulsalam, the ISX's chief executive.

And even amid the worst of Iraq's violence, in 2006 and 2007, when car bombings, assassinations and kidnappings were rife, investors came to every session. "We didn't suspend operations a single day," Abdulsalam said.

But it's clear much remains to be done if the exchange is to meet the hopes of its founders.

In its heady early weeks of trading in 2004, about $10 million (Dh36.72 million) in shares changed hands per session and share prices surged by as much as 600 per cent.

Now, with over three times the number of companies listed, the value of average daily trading is about $1 million, Abdulsalam said, adding that the market capitalization of the companies listed on the exchange stands at about $3 billion. That's a level which Jan Randolph, director of sovereign risk analysis at IHS Global Insight, describes as "comparable to a medium sized supermarket" chain in the West.

"It's still very much of a frontier market," said Randolph.

Do you think Baghdad is ready for a modern stock exchange? Would you invest in Iraq at this time?