Iraq stock market: Iraq is proving an unlikely oasis for investors amid the Arab turmoil. Global markets have been unsteady following the wave of unrest shaking the Middle East and North Africa, but the Baghdad stock exchange is thriving. Benefiting from no foreign ownership limits or capital controls, it is up 23 per cent this year.
The shares in Iraq’s main index, which comprises 85 listed companies, have risen nearly in percentage terms as much as they have fallen in Egypt over the same period. Meanwhile the Dow Jones index for Middle East and North Africa has shed nearly 7 per cent as funds scramble to meet redemptions. And globally, the Thomson Reuters Global Price Index is up only 1.5 per cent, with investors trying to assess the impact of a potential war in the Middle East and the recent natural disaster in Japan.
Admittedly, Iraq is starting from a low base. After decades of war and sanctions which left the country starved of investment, economic growth is set to rocket from low single-figure digits to over 10 per cent in 2011 through 2015, according to the International Monetary Fund. That's fuelled by minimal government debt, soaring oil prices and the many energy deals Iraq has signed hoping to more than double oil production to 6.5 million barrels per day by 2014 - about four times Libya’s pre-crisis daily output.
But the emergence of relative political stability is the main cause of Iraq's market bounce. Invest AD, an offshoot of the state-owned Abu Dhabi Investment Council launched an Iraq fund around the time a national unity government was being formed last year. Since then others have followed suit. In time, the value of the stock exchange’s total market capitalisation could rise from its current 4 per cent of GDP to levels in line with other emerging markets – where it usually accounts for 20 per cent to 40 per cent of GDP.
Baghdad remains a dangerous place, rife with sectarian tensions and permanently at risk of meddling from Iran. But the country’s relatively democratic government should shield it from the protests currently shaking the region. Clearly, the controversial nature of the transition means it cannot be a model for other countries. But Iraq's recent financial successes suggest that it could emerge as a sort of refuge for investors in the risky region.
