IRAQ: Baghdad stock market prepares to go electronic

Stock brokers and investors hope the planned introduction of electronic trading to the Baghdad stock exchange will speed up transactions and make it easier for foreigners to trade Iraqi shares. Investors yell out instructions to brokers who scribble down prices on a white board in the two-storey building which houses the Iraq Stock Exchange in Baghdad, and where prices have yet to fully recover from heavy losses they took after almost two years of sectarian bloodshed made trips to the bourse a risky venture. The exchange's executives and brokers say they hope things will improve soon thanks to an electronic system set for launch early in 2008 to speed up transactions and make it easier for foreigners to trade Iraqi shares. "Non-electronic trading is very slow. Firstly, certificates are issued late, and problems can occur with sales contracts. Electronic trading will change all this," said Lubna Anwar, one of about 10 women brokers at the trading floor. Anwar, an accounting graduate from the University of Baghdad and a broker since 1992, said she and many other dealers attended training courses in neighbouring Jordan on how to use the new trading system, which will be supported by the Nordic and Baltic stock exchange company OMX. Like so many other buildings, looters stripped the stock exchange bare of its furniture and equipment soon after the U.S.-led invasion toppled Saddam Hussein in 2003. The market reopened in mid-2004 and share prices soared, even while attacks wrought havoc on Iraq's streets and power shortages and long queues for gasoline disrupted everyday life. But trading was suspended for several months in 2006 after a dramatic rise in violence following the bombing of a major Shi'ite Muslim shrine in Samarra in February that year. When trading resumed, share prices plunged. A security crackdown on al-Qaeda and Shi'ite militants launched in February, which included the deployment of 30,000 extra U.S. troops, contributed to sharp drops in attacks and helped some shares trim their losses, brokers said. On a typical day's trading last Sunday (November 25), only 21 out of a total of 94 listed Iraqi companies traded during a two-hour session, with shares worth 399 million Iraqi dinars (319,200 U.S. dollars) changing hands. Brokers said finalising transactions by investors are lengthy procedures under present rules, which require among other things the investor to send a passport copy ratified by an Iraqi diplomatic mission. "Electronic trading will save us time in transferring ownership of shares," said stock broker Ali Jalal Amin. "An investor would be able to buy his shares one day, and handle them in the following session the following day. Currently, however, an investor buys shares and has to wait for a month or even more than a month before he secures ownership of the shares. This leads to the slow movement of capital, and thus to reduced trading and reduced profits," Amin said. Brokers said foreigners trade Iraq banking shares, the most active sector, while industrial and agricultural stocks remain largely illiquid. Some investors said shares they had bought for as much as 60 dinars were now trading at 3 dinars. However, some observers said going electronic was unlikely to encourage foreigners to snap up more Iraqi shares, adding the foreign investors would tend to wait to make sure the current lull in violence is not temporary before even beginning to examine the economic situation.

ITN Source | December 3, 2007

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