New York – Even as political protests sweep across the Middle East, investors continue to show strong interest in the Iraq Stock Exchange (ISX). The value of the ISX’s 88 listed companies has risen 24.27% in 2011, in contrast to the region’s 15.21% losses year-to-date, as measured by the S&P Pan Arab Composite Index. Foreigners–mainly from the United States, Europe, the Gulf and Egypt—have invested record amounts in 2011, with over $20 million (or 23.4 billion Iraqi Dinars) of foreign capital flowing in so far in 2011.
The ISX began its ascent in late 2010, according to Ken Kuhn, president of Global Capital Investments, an investment management company that specializes in Iraqi publicly-traded stocks and private equity. Kuhn said pent-up demand for publicly-traded companies was unleashed in December 2010 when the United Nations voted to lift international sanctions against Iraq, followed by Iraq’s parliamment voting to seat a new government. Higher oil prices are also now benefiting Iraq as investors bank on the country again becoming a major oil producer, he added.
“Stock markets are often leading indicators,” commented Mr. Kuhn. “Iraq has enormous challenges, but the stock market’s gains clearly reflect investors’ optimism that they can be met,” he added.
The Iraq Stock Exchange, or ISX, began trading in 2004 with 15 stocks. Its current market capitalization totals less than $4 billion, but investors have been warily eyeing Iraq as the next Kuwait or Russia because of its vast oil reserves, estimated to be as large as Saudi Arabia’s. Until late 2010, investors had remained largely on the sidelines due to its political and social instability.
Continuing social and economic stability could specifically benefit Global Capital Investments, an investment management firm focused on investment opportunites in Iraq. Global Capital Investments recently applied for, but has not yet received, political risk insurance coverage from the Overseas Private Investment Corporation (OPIC), a U.S. government agency. OPIC provides financing and political risk insurance to support U.S. businesses of all sizes to invest in projects in emerging markets that have positive developmental impact when private sector support is not available.