Monday, October 27, 2008

BAGHDAD — As the world’s markets crumble, the tiny Iraqi stock exchange has proved to be an island of financial security, with the embattled nation’s main index belying the violence that still plagues the city outside.

The main Iraq Stock Exchange, or ISX, index has jumped more than 50 percent since January, rising from 34.6 points to close at 50.31 Thursday.

“We’re not really affected by the international financial crisis here because we’re not connected to the rest of the world,” said Annos Ismael, a young trader who said he had turned a 40 percent profit on his investments this year.

Hidden behind huge blast walls and guarded gates on a corner of Baghdad’s commercially vibrant district of Karradah, the exchange is a throwback to 19th-century Wall Street.

The ISX operates manually rather than with computers, relying on an open-cry system and manual transactions, although Taha Ahmed Abdul Salam, chief of the exchange, said electronic trading will begin next month.

“This will allow investors to buy and sell shares in the same session,” Mr. Salam said in an interview.

Stockholders now have to hold stock certificates, which take companies up to two weeks to issue, before they can sell the equities they own. Margin and futures trading are not allowed. Foreign investors are few.

Inside, the ISX’s small trading floor buzzes with activity - brokers quote and take orders on paper and track stock prices on white market boards as investors lean on the counter and call out buy and sell orders.

Over the past few weeks, hotels have been the hot picks on the ISX, rising more than 40 percent in the past two months. The gains come more on rumor than hard news that investment is set to pour into the sector.

“Rumors have a huge impact on this market, and economic fundamentals have little to do with it,” said Mr. Ismael, who at 30 is one of the younger traders on the mainly male trading floor.

“The thing is that you can’t ignore rumors in this market, even if you know it’s all lies,” he added.

The ISX, which is open two hours a day three days a week, may operate in financial isolation, but traders here are aware that the global credit crisis could damage Iraq, still struggling to find its economic feet after the U.S.-led invasion of 2003.

“Absolutely, the crisis could affect Iraq,” said Adil al-Jawahiri, a trader of 15 years. “Iraq exports mainly oil, and imports all kinds of goods. If prices vary, this could impact companies.

“I’m watching the news very carefully, especially the Gulf region,” he added.

Foreign investment, mainly from traders in Arab countries, accounts for about 5 percent of the total invested in the market.

As a whole, the ISX market capitalization of traded shares last year was $1.7 billion, and this year that figure has been surpassed, although it is still a fraction of the about $10 billion of the now-defunct Baghdad Stock Exchange.

Older traders say the old Baghdad bourse was rife with corruption and often manipulated by favorites of Saddam Hussein’s regime, but at the ISX it is often tougher to make money.

“It was much better before,” Mr. al-Jawahiri said.

The ISX has been open since 2004, and, although it shot up in its few months of trading, sectarian violence pitched the bourse toward extinction.

“I had to call brokers to beg them to come to work,” recalled Mr. Salam, who carries a pistol and said many of his friends were kidnapped and killed at the height of sectarian violence in 2006.

Prices began to climb in 2007, and 2008 is expected to be a stronger year yet, although the main index is still not at the peak of 65 points it hit four years ago.

“It takes a very long time,” Mr. Salam said.

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