Since 2007, the Rabee Securities RSISX index has ended on a down note every year except 2010. (See chart.) In 2007, 2008, and 2009, the index peaked in July, August, and November, respectively, subsequently falling 27%, 7%, and 9% from those peaks to the respective year-end closes. 2010 was exceptional because the new government was formed in October but so far this year the pattern appears to be recurring. Since peaking on October 4, the RSISX is already down 18% (as of November 14).
The timing of these declines might be due to chance. After all, four years of data isn’t much to go on. On the other hand, however, there may be a real phenomenon here resulting from the way that Iraqi capital increases are done.
Typically, capital increases seem to be more common in the first half of the year, occurring around the time that full-year financials for the preceding year become available. Generally the shares will be suspended before there is enough time for holders of large positions to sell, which means that they will be stuck with whatever new share issues are announced at the shareholders meetings.
Investors are thus likely to end up with bigger positions than they would ideally like and will be unable to get out of them until the suspension periods end. Since suspensions go on for a quite a few months, the first chance they will get to rebalance their portfolios is bound to be some time in the second half.
Could the year-end jinx just be a matter of investors dumping unwanted new shares as suspended companies resume trading?