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Iraq Stock Trade Sign of Investor Confidence

05 Feb 2013
On Sunday (3rd February, 2013), an Iraqi telecom company raised near about $ 1.3 billion on Baghdad’s small stock exchange in one of the region’s largest share offers in years – a sign of investor confidence in the fledgling private sector in spite of the violence that still plagues the country. In a reminder of Iraq’s instability, quite a few suicide attackers on foot and in two explosives-laden cars attacked a provincial police headquarters in the northern Iraq, killing at least 15 people and wounding 90. Rescue workers led away shocked survivors, which also includes veiled women climbing over debris, and pulled many mangled and scorched bodies from the rubble. The level of violence has fallen sharply since the worst sectarian fighting in 2006-2007, yet bombing and shootings still kill dozens of people every month. Investors say the continued security risks, along with the concerns about the official red tape and corruption, have restrained the growth of the private sector in Iraq. Iraq sits on vast oil reserves, and the foreign investment has focused heavily on the government-controlled energy sector. So, when near about two-thirds of the money raised by the telecom came from foreign purchasers, undoubtedly that was a good news for the economy of Iraq. Shwan Taha, who is the head of Rabee Securities, the brokerage company that organized Sunday’s share float of Asiacell, one of Iraq’s three main mobile phone service providers, said that Iraq is not an easy place to do business in. He also said that Iraq came out of a long autocracy. They had a battle of around 30 years and sanctions and they missed several trains not just one. Shwan also said that Iraq is now doing lot better. The foreign investors come to Iraq not thinking that they are putting their money in Switzerland, and bombings have become regular incidents for the Iraqi people. Sunday’s share sale by Asiacell more than doubled the market capitalization of the low-volume Iraq Stock Exchange in a single day, from $ 4.7 billion to $ 9.65 billion, said Rabee Securities. A quarter of the shares, or 67.5 billion was offered by Asiacell. The initial sharp price was set at 22 Iraqi dinars, or just under 2 cents. Near about 70 % of the float was bought by foreigners and the rest 30 % was bought by the Iraqis, for a sum of $ 1.24 billion, the brokerage firm stated. Regular dealing of the shares had started on Monday. It was the first stock float on the ISX, which was set up in the year 2004, just a year after the invasion by U.S., which overthrew the Iraqi dictator Saddam Hussein. The head of the exchange, Taha al-Rubaye said that he has belief that it is also biggest initial public offering, or IPO, of shares in the Middle East in nearly 5 years. Al-Rubaye expressed that he has hope that the Asiacell deal will send a signal to the government that investor interest in high and that it must do more, such as performing regulatory reforms, for encouraging the private business – in not just energy. Iraq has a Gross Domestic Product (GDP) of some $ 130 billion, largely due to its oil wealth, and 95 % of the state budget comes from the proceeds of oil exports. Al-Rubaye said of the Iraq’s decision-makers that it is quite tough to change the mentality. There are delays and they are not in a hurry. But he believes that it is also time, because the relationship between the Iraqis and the whole world is growing up. The editor of Iraq Business News, an online newsletter, Padraig O’Hannelly said Iraq offers important opportunities even outside the oil sector. He also said that concerns about security, corruption, bureaucracy have clearly deterred many potential foreign investors, while others with a long-term view have chosen to involve with Iraq and work through the difficulties. During the trading session on Sunday in Baghdad, several dozens of Iraqis, many of retirement age, followed growths on large screens in the stock market. Adnan Jassim, 63, First-time investor, who is a retired government employee, said that he bought 10,000 shares of Asiacell and would have brought even more if he could have afforded them. He explained his decision of entering the stock market saying that Asiacell is a well-known company. Asiacell, which has near about 10 million subscribers, competes against Zain Iraq, part of Kuwait’s Zain, and Korek, an affiliate of Franc Telecom. The Gulf state of Qatar’s government-backed Qatar Telecom had a majority stake in Asiacell before Sunday’s sale. All the three Iraqi mobile phone companies had been needed to list the shares on the stock exchange as a condition of their 15-year operating licenses and all of three companies, missed a deadline in August 2011 to offer shares to the public. As the dealing was under way in Baghdad, the suicide attackers stuck in the disputed city of Kirkuk, some 290 kilometers (180 miles) north of the capital, Baghdad. Kirkuk is home to a mix of Arabs, Kurds and Turkomen — all with competing claims to the oil-rich area. The Kurds want to incorporate it into their self-ruled region in Iraq's north, but Arabs and Turkomen are opposed. In the attack, a car bomber drove his vehicle into the Kirkuk police headquarters, two police officers said. Then a bomb placed in a parked car was detonated. After the second explosion, two suicide attackers armed with machine guns and grenades tried to storm the station. They were killed before they could enter the building or detonate their belts rigged with explosives. While there was no immediate demand of responsibility, car bombs and coordinated attacks are favorite tactics for Sunni insurgents, such as al-Qaida’s Iraq branch. The rebellious attacks are the parts of Iraq’s persistent sectarian strife. In recent times, tensions have been growing up between the Shiite-led government of Prime Minister, Nouri al-Maliki and the country’s Sunni and Kurdish minority. Tens of thousands of Sunnis have taken to the streets, with complaints against the official discriminations, while the central government of Iraq has exchanged threats with the leaders of the autonomous Kurdish region in northern Iraq over Kirkuk and foreign oil deals. Source: [NPR]
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