Representatives of Iraq’s two stock exchanges are in Dubai this week to court regional investors and to present their respective business case. Their visit comes at a time when some Middle Eastern bourses are among the world’s best performers, while they are facing their own set of challenges.
For the established Baghdad-based Iraq Stock Exchange (ISX), the number one hurdle to overcome remains the absence of custodian services in the country, a lingering issue that is making foreign investors jittery about buying shares there.
Ali Jalil Obaid, chairman of the ISX board, on the sidelines of an event to promote the Iraqi exchanges, remarked, “That is the main problem now because non-Iraqi banks are scared.”
He also added, “We issue a message to all international banks: come for we need any bank to give this [custody] service to the Iraq Stock Exchange, the door is open.” National Bank of Kuwait last year said it would start offering custody services through its local subsidiary.
Presently, ISX is currently home to 84 listed companies. Its performance has suffered in the past two years, mirroring the spike in violence that has engulfed the oil-rich country. Officials at the event also pointed their finger at corruption, bureaucracy and the painfully slow transition towards a more open economy for blocking Iraq’s economic development.
Meanwhile, the soon-to-be-operational Erbil bourse is hoping to see the first listings to take place by the end of this year. Its concerns are less about security but more about promoting the need for financial institutions and attracting an increasing number of foreign investors.
Fakhir Surji, a board member of the Erbil Stock Exchange, stated, “The only way to get stability and security in the country is to have an economic boost by providing stock exchanges throughout the state and to teach people how to learn to invest their money and not leave it at home.”
The ESX, situated in Iraq’s semi-autonomous and economically thriving Kurdish region, last year enlisted Nasdaq OMX Group to help set up its trading system. Mr. Surji said the Nasdaq software would be fully implemented in July and that the bourse would then be ready to accommodate the first listings by the end of the year, five to 10 according to his estimates, including one “major” telecom company which he declined to name.
The ESX official dismissed that Iraq’s two exchanges will be competing with one another, instead predicting the creation of more bourses in the country.
Mr. Surji also remarked, “Not only is there room enough for two [bourses], there is room enough for other such as in Basra, Kirkuk, Najaf, and Karbala which will happen in the future.”