IRAQI STOCKS NOT EFFECTED BY CIVIL WAR

Categorized | Investment, Mark DeWeaver on Investments and Finance

Iraqi Stocks Unfazed by ‘Civil War’


Posted on 13 May 2013. Tags: Civil War, Hawijah, ISX






The security situation in Iraq hasn’t looked this bad in quite a
while. Following the killing of at least 36 Sunni protestors in
Hawijah on April 23, people are now even talking about a possible
partition of the country. “It is wrong to say we are getting close to a
civil war,” one Iraqi politician told the Guardian. “The civil war has
already started.” (See this story.)

Yet Iraq Stock Exchange (ISX) investors don’t seem to have noticed.
If a return to the sectarian conflict of 2006-2007 were imminent, Iraqi
stocks would have crashed. Yet since the Hawijah massacre the Rabee
Securities RSISX index has risen 2.8% (as of May 9). It’s up 11.6% year to date.

The market seems to agree with Joel Wing’s assessment in a recent piece
for Foreign Policy. He argues that “growing support for the wider
insurgency does not mean that Iraq is heading towards a new civil war”
because:

(1) “Most operations by militants are in specific cities, and even then only affect a small percentage of the population” and

(2) “So far, the Shiite community is relying upon the government to
take care of security rather than taking matters into their own hands.”

As long as these two points are correct, it’s easy to see why ISX
investors should be unfazed. Sporadic terrorist bombings and gun
battles between the Iraqi army and insurgents in particular
neighborhoods result in tragic loss of life but don’t add up to a ‘civil
war’. And as long as most Iraqis remain unaffected, increased levels
of violence just aren’t going to have any material effect on GDP growth
and the earnings of the listed companies.

Really the current escalation of violence should not take anyone by surprise. Historically we see a spike in violence come spring every year in that region. It has been that way so long that Even the bible speaks of it ...

It happened in the spring of the year, at the time when kings go out to battle ... (2 Samuel 11:1)