The Iraq Stock Exchange ended the year with a bang last month, with Rabee Securities’ RSISX index rising 8.8% in the final two weeks of trading. Having been down as much as 10% year-to-date in early October, this index actually managed to close 2010 up 1.7%. Volume in the final week rose above IQD 10 bn for the first time since May to IQD 11.9 bn (US$ 10.2 mn), more than double the previous week’s IQD 4.5 bn.
During the holiday shortened first week of 2011 (consisting of only January 4 and 5) there were more positive signs. In just those two days the RSISX rose a further 6.7%, while volume came to IQD 12.9 billion, of which Baghdad Soft Drinks (IBSD) accounted for 72%. IBSD has been limit up for three days in a row, starting on December 23 (the last trading day of 2010), when the shares finally resumed trading following a six month suspension due to a capital increase.
Even more exciting market action can be expected in 2011. With the formation of the new government now a done deal, the stage has been set for a return to the pre-insurgency peaks of 2004-2005 when IBSD got as high as 8.55, compared to just 1.33 today, INCP, now only 4.45, reached 27.22, and BCOI, which last traded at 1.39, peaked at 7.78. (Old highs are adjusted for subsequent capital increases. See my November 2 post for more examples.)
And there’s no reason prices should stop at those levels. This time there will be much more money chasing Iraqi stocks as investors from Iraq’s oil-rich neighbors and the Iraq funds now being marketed around the world scramble to get in. But the supply of stock isn’t going to be all that much greater than it was five years ago. These buyers may start out cautiously, trying not to push too hard while filling enormous orders, but will soon find that they have no alternative but to bid wildly. Then the market will truly go ballistic, gapping up over a series of weeks until the supply-demand equilibrium is finally reached at some stratospheric new level.