ISX Year-end Jinx Lifted?

By Mark DeWeaver.

The ISX historically has tended to go down in the second half of the year. Last November, I argued that this may be due to the timing of capital increases. (See this post.) If this is the case, the recently announced new rules on share suspensions mean that the market will no longer follow its old seasonal pattern.

In the past, companies would be entirely suspended from trading until rights and bonus shares were deposited in the Iraq Depository Center. This usually took many months. As capital increases generally take place in the first half (around the time that financials for the previous year become available), investors had to wait until the second half to sell. The year-end jinx, I argued, was simply the result of delayed portfolio rebalancing.

Under the new rules, original shares resume trading almost immediately after capital increases. This means that portfolios can be rebalanced right away. While it may still take months for new shares to start trading, investors can now sell some of their old shares to reduce their positions.

As a result, it seems to me that there is no longer any reason for Iraqi shares to decline into the year end. The bad news, of course, is that the year-end jinx hasn’t really been lifted. It’s just going to happen earlier in the year.

4 Responses to ISX Year-end Jinx Lifted?

  1. Kickabuck July 19, 2012 at 3:11 am #

    While the guts of you article hold true, this statement appears invalid: “The bad news, of course, is that the year-end jinx hasn’t really been lifted. It’s just going to happen earlier in the year.”

    Several waves of stocks returning to trade challenge this idea. While it still may happen, the free shares are now seen as dividends reinvested into more shares, the paid up offers are being consumed mainly by the majority shareholders. You know this because you wrote the mansour bank article. Who is buying all the paid up offers to increase capital below market price? INSIDERS

    The ISX has become a difficult market to enter for small player wishing to own stock in their own name. The risk is still very high even if you find an entry point.

  2. DeWeaver July 19, 2012 at 9:15 pm #

    It seems to me that the majority of the rights issues are still being done below the last traded market price (i.e. at IQD 1 while the market price was higher than IQD 1). I think this has been true for all the big banks, for example. There must still be plenty of minority shareholders taking up those offerings.

  3. emmett July 28, 2012 at 9:00 am #

    DeWeaver I notice your not reporting on the dinar changing and new Iraqi dinar being announced…Parliment has been voting on it and it passed..Did you know..

  4. DeWeaver July 30, 2012 at 3:59 pm #

    I haven’t been writing on this because I don’t really have anything new to say.