How high can Iraqi stocks go?

In my October 11 post, I argued that the ISX stands a reasonable chance of joining this year’s emerging markets rally. Today, I’d like to make an even more audacious claim: in 2011, inflows of foreign money could potentially make Iraq the world’s top performing market.

You can get some idea of the upside potential for Iraqi stocks from the chart, which shows the dizzying heights to which a sudden inflow of liquidity can push a tiny new market like this one. Whether the new money is primarily foreign—as in the Russian and Sri Lankan examples—or local—as was the case in China and Vietnam, the resulting bubble looks much the same. In a time span of from one to two years, you might make anywhere from five to ten times your money if you managed to get out at the top. (Note that all four of these markets went on to reach even higher levels in later years.)

These legendary emerging markets of yesteryear can also teach us two important lessons about when to sell. First, no stock is overvalued if it is going to continue going up. In a liquidity-driven market, concern with valuations will only lead you to take profits too early. And second, don’t believe the hype. No matter how rosy the prospects for the local economy and corporate earnings seem to have become, when the supply of liquidity begins to dry up, the bull market is over.

15 Responses to How high can Iraqi stocks go?

  1. rebecca jones October 27, 2010 at 7:58 am #

    When do you believe the dinar will be revalued

  2. L Letcher October 27, 2010 at 2:58 pm #

    How does one invest in the ISX platform ?

  3. DeWeaver October 29, 2010 at 12:19 pm #

    It’s actually relatively straightforward. You just need to set up an account with an Iraqi broker and wire them some money. It’s all done with scanned copies of documents sent by e-mail–no need to go in person.

  4. DeWeaver October 29, 2010 at 12:19 pm #

    I don’t expect any big jump in the value of the dinar any time soon.

  5. […] How high can Iraqi stocks go 10/25/10 […]

  6. ken johnston October 31, 2010 at 9:40 am #

    Please list stocks that may be a good future investment in iraqi? thanks ken

  7. DeWeaver November 2, 2010 at 7:54 am #

    The safest thing is a diversified portfolio of the most heavily traded names. It’s important to realize that this is a market where stocks occassionally get delisted without any warning!

  8. MzJustRight November 2, 2010 at 8:38 am #

    Hello, just wanted to know the latest update on the dinar revalue and how soon.

  9. Lintee November 2, 2010 at 10:10 pm #

    DeWeaver says:
    October 29, 2010 at 12:19 pm
    I don’t expect any big jump in the value of the dinar any time soon.

    Just trying to understand if the Dinar isn’t being revalued then how can stock in Iraq become so valuable?

  10. […] inevitable stream of activity flowing towards Iraq. Take a look at Dr. Mark A. DeWeaver’s economics blog and you’ll see that as the world latches on to this excitement and piles into such a small […]

  11. DeWeaver November 4, 2010 at 7:29 am #

    The stock market isn’t really an exchange rate story. Even if the exchange rate remains unchanged stocks will go up if more people (i.e. foreign funds) are trying to buy them.

  12. DeWeaver November 4, 2010 at 7:29 am #

    I don’t expect this to happen any time soon.

  13. david November 21, 2010 at 6:03 pm #

    will the trade happen before 2011

  14. DeWeaver November 29, 2010 at 7:35 am #

    I’d bet on the stock market rather than the currency

Trackbacks/Pingbacks

  1. Current Tonal Scripts & Scenarios Updates (10/30/10) « Medi8ing Trends on the Playing Field - October 30, 2010

    […] How high can Iraqi stocks go 10/25/10 […]

  2. Three New Equity Funds in One Month | Iraq Business News - November 4, 2010

    […] inevitable stream of activity flowing towards Iraq. Take a look at Dr. Mark A. DeWeaver’s economics blog and you’ll see that as the world latches on to this excitement and piles into such a small […]

  3. How high can Iraqi stocks go? « carapace – Not your father's america - November 10, 2010

    […] http://www.iraq-businessnews.com/2010/10/25/how-high-can-iraqi-stocks-go/ […]