Wanted: Foreign Funds

Recently ISX CEO Taha Ahmed Abdul Salam told reporters that foreigners now hold 19% of ISX-listed shares. (See this link.) This seems like a big percentage but in fact reveals that foreign institutional participation in the market remains quite limited.

As of the end of last month, strategic shareholders in the eight foreign-invested banks held 328 bn shares. (See Table. Figures for total shares are from the May ISX monthly report.) This number is 17% of the total for the whole market. (Doing the same calculation by market cap you get 22%.)

These investors are not really market participants. Most are large banking groups like HSBC, which owns 70.1% of BDSI, or National Bank of Kuwait, which owns 75% of BROI (the IFC owns another 10%). Their Iraqi bank holdings are not short-term punts but rather form part of a long-term business strategy. They are generally unlikely to trade and their holdings cannot be thought of as part of the free float.

The remaining share of only 2% for all other foreigners is actually a more interesting number than the 19% cited by the CEO. If this is also their share of total ISX market cap, their holdings would only be worth about US$ 76 mn. Considering that US$ 20 mn in assets under management is often cited as the minimum threshold for a viable fund-management business, it seems there can be no more than a handful of small foreign funds in the market so far.

10 Responses to Wanted: Foreign Funds

  1. Stew June 23, 2011 at 1:36 pm #

    Mark… from many articles popping up from Iraq it’s being reported the Central Bank of Iraq announced on Monday they will redenominate the dianr, and the new currency will include a bill worth about $100.

    Is Iraq Business News on the case?

  2. DeWeaver June 23, 2011 at 8:12 pm #

    Hi Stew: I’ll certainly want to cover that one if there is anything new and substantive. I wonder what you would say is the most authoritative source among the stories you have seen so far.

  3. Julian June 26, 2011 at 5:31 am #

    Mark, I don’t know of any “authoritative” source on the Redenomination of the Iraq Dinar. The XE Currency site has a note (in Red) that states that the dinar “may” have Redenominated; so perhaps the process has begun.

  4. DeWeaver July 1, 2011 at 11:05 am #

    Thanks, Julian. Looks like it was in Al Sumeria a few days ago. I’ll have more in my next post.

  5. Stew July 1, 2011 at 11:23 am #

    Mark… I responded after your post above with the link to Al Sumeria. It never showed up. Figure it must have been due to the link.

    Sounds like you are about to write a redenomination article… look forward to it.
    One interesting thing I saw was the CBI adviser stated they were going to release a note worth about $100 PRIOR to the redenomination. That sounds like a new 100,000 dinar note is on the way.

  6. DeWeaver July 4, 2011 at 3:26 pm #

    Hi Stew: I think a new 100,000 note makes a lot more sense than the redenomination. Whether they get rid of the three zeros or not they obviously need a higher denomination.

  7. Stew July 4, 2011 at 4:08 pm #

    Mark… I saw an article in the last day or so where the CBI advisor stated the plan is to “implement” the removal of 3 zeros by the middle of next year. So if they plan to wait that long before redenominating… I would certainly expect to see a 100k note.
    A 100K note will make for some interesting conversations in Dinarland.

  8. DeWeaver July 4, 2011 at 6:05 pm #

    Stew: Yes, it’s hard to see how they could complete a redenomination any sooner than that. Do you expect a 100K note to be seen as evidence for or against a big dinar revaluation?

  9. Stew July 5, 2011 at 12:29 am #

    Yeah… seems like they need ministry and parliment approval. I guess they have to approve funding for the project, then print the currency and get it in place for the swap. Can see that taking a while.
    As for the 100K note… I see it as just another nail in the coffin of a big RV. Yet I know there’s a group of dinar promoters that will spin it in their favor somehow.
    100K note or not, doesn’t change my thoughts on this. If the money supply numbers reported by the CBI and the IMF for Iraq are true, and I see no reason to believe otherwise, then any thought of a big RV is plain silly.
    Last report is Iraq has 28.5 trillion dinar in circulation. The whole world combined has about $5 trillion worth of currency in circulation (according to DollarDaze). The dinar crowd believes Iraq will RV those 28.5 trillion dinar to $1 each… giving them almost 6 times more currency than the whole world combined. LOL… while they have barely one tenth of 1% of the worlds GDP… and 90% of that is dollar denominated oil sales.
    And to think… some people think it should RV to $3 or even more.

  10. DeWeaver July 5, 2011 at 5:36 pm #

    Stew: Yet another nail in the coffin!