Worried About a Global Markets Meltdown: Try Iraqi Stocks

by **GirlBye** Sun Oct 07, 2018 7:11 am

Companies listed on the frontier market are up 10% this year as investors bet on post-Islamic State economic recovery

Worried About a Global Markets Meltdown: Try Iraqi Stocks BN-YA673_IRAQMK_GR_20180328134347

The Iraq Stock Exchange, with a market capitalization of around $10 billion, is up about 10% this year, ahead of other similar frontier markets.PHOTO: AHMAD AL-RUBAYE/AGENCE FRANCE-PRESSE/GETTY IMAGES

BAGHDAD—Iraq’s stock market, tucked behind blast walls in an upscale part of Baghdad, is defying the violent swings that have struck the global markets this year.
Shares of companies listed on the frontier market are among the world’s top performers in the first quarter as investors bet on the country’s economic recovery following the defeat of Islamic State. The three-year war destroyed parts of the country’s infrastructure, leaving many businesses struggling.

As the government seeks to rebuild the war-ravaged country with the help of foreign aidand investments, investors are buying up shares of Iraqi companies they expect to benefit the most from those efforts—from banks and industrials to telecommunications firms and hotels.

The Iraq Stock Exchange benchmark ISX index is up about 10% this year, ahead of other similar frontier markets that are up 0.6%, according index provider MSCI Inc., MSCI -1.13%placing it among the top 10 markets globally. Those gains come even as many other stock markets have been hard hit by worries of an imminent bear market after a multiyear bull run.

Iraq’s market missed out on that cycle, losing about 60% of its value over the past three years since Islamic State militants took over around one third of the country in 2014. That drop also coincided with a steep fall in the price of oil, the government’s biggest revenue earner.

‘ You’ve got very cheap assets, very few foreign investors, misunderstood politics and a wave of oil liquidity coming into a very small capital market ’—Grant Felgenhauer, principal of Euphrates Advisors

“Iraq today resembles other early-stage markets—like post-Soviet Russia and others—that ended up performing well for investors,” said Grant Felgenhauer, principal of Euphrates Advisors, which manages the Euphrates Iraq Fund. The fund has $130 million invested in the Iraqi stock market and is up more than 31% in the first quarter of 2018, according to Mr. Felgenhauer.

“You’ve got very cheap assets, very few foreign investors, misunderstood politics and a wave of oil liquidity coming into a very small capital market. The pieces are falling into place for good things to happen,” he said.

With a market capitalization of around $10 billion, the Iraqi bourse is relatively small compared with other similar frontier markets such as Argentina and Vietnam and even regional markets such as Saudi Arabia and Kuwait. Just over 100 companies are listed on the stock market, accounting for an average daily turnover of around $1 million to $2 million.

https://www.wsj.com/articles/worried-about-a-global-markets-meltdown-try-iraqi-stocks-1522580403

This article was published April 2018 but I thought it was an interesting read