Dinar Move a Plus for Stocks

Last week the Central Bank of Iraq (CBI) announced that it was authorizing the two largest state-owned banks, Rafidain Bank and Rashid Bank, to sell US dollars at auction. The CBI’s goal is to reduce the spread between its own auction rate and the unofficial “street” exchange rate, which has recently been as wide as seven percent. The CBI expects the spread to narrow to four percent initially and eventually to reach two percent as the unofficial rate strengthens. (See this story from Alsumaria and the “Economics” section of last week’s Rabee Securities Weekly Bulletin.)

A five percent strengthening in the street rate might not sound like much. But the CBI is doing more than just narrowing the spread. It is also eliminating uncertainty about the future direction of the dinar by signaling that no further deprecation will be tolerated.

This move is positive for Iraqi stocks because a stronger currency will increase the expected value of the IQD-denominated earnings of the listed companies relative to the return on USD assets. The increased supply of US dollars may also push up earnings at the listed banks by allowing them to expand their offerings of USD products such as letters of credit.

While you’d never guess it from the market’s tepid reaction to the news, the CBI has given investors yet another reason to be long the ISX.

9 Responses to Dinar Move a Plus for Stocks

  1. Stew May 30, 2012 at 6:12 pm #

    So you’re telling me that a currency that is being promoted by internet dealers who claim it will RV 100,000% in the near future… you’re telling me that currency can’t even maintain it’s official 1166 exchnage rate and is even up to 7% below that rate.
    Obviously the people of Iraq don’t believe the internet gurus and dealers.

  2. Ken Bachmeier May 30, 2012 at 10:26 pm #

    The Iraqi people still can’t get it together to make their country self sufficient, let alone to get their house in order, which would include their currency. Their government needs more internal supervision, which would hinder the corruption that is going on in that country. Hussein might have been brutal, but he knew that the only way to get his message across, was do it my way or die. Obey or lose your life. That’s not the way to run a government, but you need to establish enforcement of the law by jails and/or punishment, to keep order and make sure the middle managers are following suit. If everyone is grabbing what they can now, it will NEVER come about. The iraqi currency needs to be supported by more than just oil, other industries are needed, and people who know how to make it work.
    So until that happens, the dinar isn’t going to do a thing. I was there, and the iraqi people don’t even use the iraqi dinar. They don’t have it to use. So WHY all this hype about the dinar? It’s not even in circulation.

  3. ADRIAN May 31, 2012 at 9:27 pm #

    SCAM SCAM SCAM

  4. adrian June 1, 2012 at 1:14 pm #

    Just the true, iraqi dinar was a dream.

  5. Evan June 2, 2012 at 8:50 am #

    Hey Ken, I dont want to get into it with you or anyone else, but the fact is there are going to be less and less dinars in circulation until the new currency is introduced next year. Its all part of the CBI’s plan to reduce the currency from 27 trillion to around 15 billion and they are well on their way to do just that. All that value will then be added to the remaining left over currency and when the newer notes are released to the public they will have greater value automatically ultimately mimicking the American monetary system. $1,5,10,20,50,100. The new dinar will revalue to reflect the new smaller amount of notes that will be in circulation when the entire process is done. Watch the policy of the country and you will see for yourself what they want to accomplish.The dinar is going to be very valuable very soon. $$$$$$

  6. ADRIAN June 5, 2012 at 6:22 pm #

    Evan, sorry for getting in your business but the dinar is going to be valuable for the people living in Irak and the $$$$$$ is go to be same value 1,000 = 1 dinar no profits are going to be made with R/V or without it. The intentions of the CBI are very clear, re-denomination. Sorry Evan I dont want to get into it with you or anyone else but, you sound like a pumper. Pumper=8 years = yessssss, today is the day. Real news, real life. Broker, dealers, guru = liar an $$$$$$$$$$.

  7. Evan June 13, 2012 at 9:32 am #

    I base my insight on facts and policy, not pumper speculation. Open your eyes people. The world powers would not be pouring billions into Iraq without expecting some sort of return. The free market will evolve in Iraq and stability and value will follow. Thats how it works folks. Simple Hayak economics will run its course all by itself without influence from government. The stage is set in Iraq for the perfect storm. The value will come regardless. Revalue, re denominate, re invent, whatever you want to believe or not believe, This monster now has a mind of its own. Get on board either with the currency, the ISX, The bank or any thing having an impact in the country and you cannot lose. Its a filthy dirty managed float thats going to explode under its own pressure, The real value of the Dinar will rear its head very soon.

  8. jim June 13, 2012 at 4:25 pm #

    I ivested in the dinar. I would like to know ,who you are and what is your background and where you get your info?

  9. Aussie June 14, 2012 at 2:20 am #

    Blah Blah Blah – some are believers and some are not – A friend recently visited with me from Israel and asked me to hold his 10Million Dinar for him as he is VERY CONFIDENT that the RV is as good as done – I had knocked and laughed at dinar buyers for some years now and when I lived in the USA – here in Australia I hear nothing about it as an investment ? ? very interesting time we live in