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Iraqi exchange looks ahead

Amid wartime ups and downs, the bourse puts its hopes in an electronic upgrade.

December 10, 2007|Waleed Ibrahim and Alaa Shahine | Reuters

BAGHDAD — One old investor used binoculars to watch stock prices. Others yelled out instructions to brokers who scribbled down prices on a white board.

Outside, barbed wire sealed the street leading to the two-story building surrounded by high blast walls. Armed guards carefully frisked visitors.

It was a quiet day at the Iraq Stock Exchange in Baghdad, where prices have yet to recover fully from heavy losses they took after almost two years of sectarian bloodshed made trips to the bourse a risky venture.

Taha Ahmed Abdul-Salam, the exchange's chief executive, said he hoped things would 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.

Like so many other buildings, the stock exchange was stripped bare by looters 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 the bombing of a major Shiite Muslim shrine in Samarra in February that year sparked a dramatic rise in violence.

When trading resumed, share prices plunged.

The year 2006 "was the most difficult year for us," said Lubna Anwar, one of about 10 female brokers at the trading floor. "We used to go to the exchange knowing that we could be targeted by a bomb or an explosion."

The security crackdown, or "surge," on Al Qaeda and Shiite militants launched in February, which included the deployment of 30,000 more U.S. troops, contributed to sharp drops in attacks and helped some shares trim their losses, broker Muqdad Jassem said.

Anwar, an accounting graduate from the University of Baghdad and a broker since 1992, said she and many other dealers attended training courses in neighboring Jordan on how to use the new electronic trading system, which will be supported by the Nordic and Baltic stock exchange company OMX.

"It was easy," Anwar said. "Only old brokers with no computer background faced problems in learning."

Brokers said they hoped the system would attract more foreign investment and boost trade volumes.

"Foreign investors . . . are increasing bit by bit," Abdul-Salam said.

Jassem said finalizing a transaction by a foreign investor could take as long as a week under present rules, which, among other things, require the investor to send a passport copy ratified by an Iraqi diplomatic mission.

Brokers said foreigners trade Iraqi banking shares, the most active sector. Industrial and agricultural stocks are mired by low trading volume. Some investors said shares they had bought for as much as 60 dinars were now trading at 3 dinars.

"Selling now means a big loss," said Mahmoud Ahmed, a 45-year-old investor, as he stood alone in a corner, his arms folded against his chest. "Do not believe anybody who says there is movement in the market."

Karim Kamal, head of equity research at the National Bank of Kuwait, said going electronic was unlikely to spur foreigners to buy more Iraqi shares.

"Mainstream investors would tend to wait [to make sure] the current lull in violence is not temporary before even beginning to examine the economic situation," he said.

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