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Budget Delay Hits KRG Banks


By John Lee.

The delay in adopting Iraq’s federal budget, in large part due to the dispute between Baghdad and the Kurdish Regional Government over oil exports and revenues, has reduced banking activity in the KRG by up to 25%, according to Adham Karim Darwesh.

Darwesh, the manager of the Erbil branch of the Central Bank of Iraq, was speaking to the Zawya news agency and explained the impact of the recent dispute:

“The delay in adopting the federal budget this year caused a 25% reduction in banking activities, as there was a three-month lag during which the market did not receive large sums of money, including wages of public servants in the governorate, which affected market transactions.”

Darwesh also pointed out how at least two banks, Rasheed Bank and Rafidain Bank had delayed opening branches in the region because of the recent delay in the $150 billion federal budget.

Standardization

Speaking of forthcoming plans for the banking sector, Darwesh said that their was a plan to unify banking standards across the whole of Iraq, to combat money laundering and corruption.

Several banks were not meeting Islamic finance standards and 5 banks have been threatened with closure over failing to build up capital reserves:

“There are many problems facing the banking sector, including the lack of new technologies in banking transactions and services, as well as the lack of qualified personnel who are up-to-date with the changing industry innovations and technologies.”

(Source: Zawya)

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Standard Chartered makes New Appointment for Iraq


By John Lee.

Standard Chartered has announced the appointment of Ahmed Muallah as Managing Director and Head of its Wholesale Banking business in Iraq.

Commenting on the appointment, Gavin Wishart, Chief Executive Officer, Standard Chartered Iraq said:

“This appointment comes as another testament to our long term commitment to Iraq. Standard Chartered is bringing its best international financial business practice and governance models to service our multinational clients. We believe Iraq has great potential for sustainable economic growth and we believe we can play a leading role in further supporting the country realize its full economic potential. I would like to welcome Ahmed to the team and I am confident he will be instrumental in further developing our business in the country.”

Standard Chartered launched its on-the-ground wholesale Banking operations with the opening of its headquarters and first branch in Iraq, in Baghdad during November 2013.

The Bank will be opening two other branches in Iraq, one in Erbil in March 2014 and then Basra later in the year.

Posted in Industry & Trade, InvestmentComments (5)

A Home-grown Rally


By Mark DeWeaver.

Another roller coaster year for the ISX is drawing to a close. By the middle of May, the Rabee Securities RSISX index had fallen 24% from its early October 2011 peak. Since then, the market has staged a dramatic rebound. As of December 8, the index was down just 3% from the October high and up 8% for the year.

This rebound is all the more remarkable because it has occurred in the absence of any pick up in foreign participation. In 2011 foreigners were net buyers in 97% of the trading weeks with a share of monthly volume that exceeded 10% in all but three months. This year, foreign net buying has fallen sharply. (See chart.) Foreigners have been net sellers in about 40% of the trading weeks so far. Their monthly-volume share has exceeded 6% in only two months. (See the latest Rabee Securities Weekly for a nice chart of the foreign share of monthly volume.)

There is also no obvious catalyst for fresh inflows of foreign money at this point. While the regulators have finally decided to offer custodian bank licenses, HSBC has apparently lost interest in providing share custody in Iraq and no one else has stepped up to take its place. (See this post for more on the custody issue.) EFG-Hermes also seems to have suspended its swaps program, shutting down another potential channel through which institutional investors might have accessed the market. (There’s more on the EFG swaps here.) Even the much-vaunted Asiacell IPO, which I once thought might at last put the ISX on foreign fund managers’ radars, now appears to be targeted mainly at local individuals.

This failure to attract outside money is not the end of the world, however. When the right economic fundamentals are in place, emerging markets can easily go up without foreigner investors. Think of the largely closed Chinese and Saudi markets for example. Or Kuwait’s infamous Souk al Manakh, which rose to such dizzy heights in 1982 that it was briefly the third largest market in the world after the US and Japan.

For the ISX to keep going up, problems like share custody don’t really need to be solved. The important thing is for the Iraqi economy to stay on its current high-growth trajectory. As long as the listed companies’ earnings are growing at double digit rates and local investors are flush with cash there’s really no reason why this year’s home-grown rally shouldn’t continue into 2013.

Posted in Investment, Mark DeWeaver on Investments and FinanceComments (2)

Iraq Government To Open Doors To Foreign Investors At London Event


  • Prime Minister Nouri al-Maliki endorses and supports event.
  • High-level delegation from several ministries and headed by deputy prime minister.
  • Financing of Iraq’s reconstruction to be discussed with international banks and investors.

Iraq is to welcome foreign investors at a major London convention and offer a stake in the country’s economic and financial future.

The major investment conference for Iraq will get underway in London next week from 17-18 September (www.iraqfinance.co.uk).

A high-level delegation, endorsed by Iraq’s prime minister, Nouri al-Maliki, and led by the deputy prime minister, Rowsch Shaways (pictured), will be welcomed by the UK minister of state for trade and investment, Lord Green, at London’s Grange Tower Bridge Hotel.

“Iraq is embarking on a major redevelopment programme and all government departments are preparing for huge growth and expansion,” said Shaways. “The aims and objectives of Iraq Finance 2012 complement the urgent needs and reforms required across the country.”

The delegation will discuss Iraq’s investment requirements and key opportunities for regenerating the country’s financial sector. Iraqi ministers and government officials are expected to call upon the support of the international community to help in financing Iraq’s reconstruction.

It is also a chance for foreign investors to discover the massive financial potential in a stabilized Iraq. The country is already emerging as a major center for international investment following its long isolation from world markets. Major opportunities exist across several industries if the appropriate financing and domestic banking sector is fully established.

Iraq will use the conference to present its ideas for PPP and project financing, as well as a series of reforms and investments for its banking sector, including the restructuring of state banks.

The event has already attracted widespread investor attention. Leading investment and private banks are taking part together with IOCs, technology companies, insurance providers, and other financial institutions, all hoping to capitalize on the reconstruction of Iraq’s physical and financial infrastructure.

Haider al Abadi, Chairman of Iraq’s Parliamentary Finance Committee said: “This conference will contribute to the existing work of the committee by exploring mechanisms for regenerating the financial sector through active participation and dialogue with international clients, as well as to address any immediate and long term needs for reform.”

To register or enquire about a media pass for Iraq Finance 2012, being held at the Grange Tower Bridge Hotel, London, 18 – 19 September, contact the organisers on [email protected] or call +44 (0) 208 849 8964.

Event: Iraq Finance 2012 – international conference on finance and banking in Iraq

Date: Tuesday 18 – Wednesday 19 September 2012

Venue: The Grange Tower Bridge Hotel

Website: www.iraqfinance.co.uk

Key Confirmed Attendees and Speakers:

1. H.E Dr Rowsch Shaways, Deputy Prime Minister
2. H.E Dr Qusayl Al-Suhail, First Deputy President of Parliament
3. H.E Dr Rafe Al Essawi, Minister of Finance
4. H.E Dr Sinan-al-Shabibi, Central Bank Governor
5. H.E Dr Ali Yusuf Al Shukri, Minister of Planning and Development
6. H.E Eng. Mohammed Al-Darraji, Minister of Construction & Housing
7. H.E Dr Sami Al-Araji, Chairman, National Investment Commission
8. H.E Dr Haider Al-Abadi, Chairman, Parliamentary Finance Committee
9. Hamdiyah-al-Jaff, Chairman and President, Trade Bank of Iraq

 

Posted in Banking & FinanceComments (1)

ISC Takes Aim at Insiders


Earlier this month, the Iraq Securities Commission (ISC) announced that it would be moving against violations of its Regulation 16, which covers insider trading. Effective July 1, the Commission threatened to bar violators from trading and to cancel their trades.

Regulation 16 defines insiders as including members of a company’s board of directors and their advisors, upper-level managers, auditors, and others with knowledge of “substantial events” that may “affect the stock price upon their announcement.” Insiders are prohibited from trading prior to the announcement of results and other potentially market-moving news and from leaking insider information before it is made public.

The ISC’s renewed focus on this issue is part of a wider effort to bring the ISX closer to international best practices. (See this post.) It is also a logical complement to recent rule changes that have shortened the suspension periods for companies having capital increases. Where the former approach seems to have been to prevent insider trading by suspending trading altogether, there now appears to be an effort to prevent insider trading by taking aim at the insiders themselves.

Posted in Investment, Mark DeWeaver on Investments and FinanceComments Off

Dunia Weekly Iraq Market Tracker


Advertising Feature

Iraq Business News is delighted to bring you the latest Iraq Market Tracker report from Dunia Frontier Consultants. The market tracker highlights the activities and market performance of a basket of publicly traded firms who derive a significant percentage of their revenues from operations in Iraq, but are traded on foreign exchanges: a proxy Iraq play as much as practicable. It also identifies and analyzes the primary political and security events that occur in country that have market-moving implications.

Click here to access the report.

Companies Mentioned:

CNPC, DNO, Eni, Exxon, Genel Energy, Gulf Keystone, Heritage Oil, Lukoil, Rosneft, Shell, Statoil, Total, Weatherford

Action Calls:

  • Reminder: Subscribe to the Market Tracker!: Today’s is the last free Market Tracker! To subscribe, please click here and select your preferred subscription options.
  • Rosneft rumored to be in talks with Exxon: Exxon reduces exposure as pressure ratchets up on Maliki.
  • Eventful week for Iraq shows bifurcation of oil and gas industry: Both Erbil and Baghdad continue to make healthy progress as their oil development moves in different directions.

Headlines:

  • Gorran objects to KRG budget: Reminder that Kurdish dissent exists and could affect effectiveness in face of Baghdad.
  • Al Hal defects to Maliki on NC vote: NC is in effect dead, but Sadr will continue to milk it.

Calendar Events Discussed:

  • June 24 – Parliament [finally] returns from 7 week break

Click here to access the report, or to select your preferred subscription option to receive the Iraq Market Tracker via email.

 

Posted in Banking & Finance, DFC Market Tracker, Industry & Trade, Investment, Oil & Gas, PoliticsComments Off

Will the Banks Get More Time?


The Central Bank of Iraq’s June 30 deadline for private-sector banks to raise capital to IQD 150 billion is fast approaching. Yet of the 21 ISX-listed lenders only three—North Bank (BNOR), United Bank (BUND), and Kurdistan Bank (BKUI)—have reached the target so far.

Rabee Securities’ most recent bank sector report found that as of June 15 another five—Bank of Baghdad (BBOB), Iraqi Middle East Bank (BIME), Al Mansour Bank (BMNS), Elaf Islamic Bank (BELF), and Dijlah and Furat Bank (BDFD)—will be in compliance once their planned capital increases are completed. This leaves another 13 banks with no clear plan to raise the required funds.

Ordinarily, institutions that fail to meet capital adequacy standards risk being taken over by the government and put into receivership. This was the fate of Warka Bank, for example. But such a penalty seems unwarranted in this case.

IQD 150 billion is, after all, an arbitrary goal. If anything, Iraqi banks typically have too much capital relative to the size of their loan books. The fact that they have not yet satisfied the central bank’s requirement does not imply that they are at risk of failure.

The obvious choice for the central bank is simply to give them more time, just as it did at the end of 2010. That was the original deadline for the CBI’s initial bank-capital target of IQD 100 billion. When a number of banks fell short of this number, they were all given an extra six months.

There’s really no reason this time should be different.

Posted in Investment, Mark DeWeaver on Investments and FinanceComments Off

Debt Crisis Hits ISX Inflows


Foreign net buying of ISX-listed shares has been waning since the middle of last year. After rising from about IQD 900 million for all of 2010, average weekly net buying by non-Iraqis rose to over IQD 4 billion in the first half of last year but then declined to about IQD 2.8 billion in the second half. As of January 20, the year-to-date average is negative IQD 111 million.

You might think that foreigners are being scared away by the political situation. The chart tells a different story, however. The current drama in Parliament only really started in December. That was almost six months after the foreign net buying peak in early June.

The foreign pullback actually corresponds more closely to the drop in world markets occasioned by the start of the European crisis last summer. It is also noteworthy that the record IQD 17.2 billion in net foreign selling during the week of October 21 occurred just two weeks after the S&P 500 hit its low for the year.

Perhaps all that really matters for foreign inflows is the likelihood of another global financial meltdown. Too bad that scenario is still not really “off the table.”

Posted in Investment, Mark DeWeaver on Investments and FinanceComments Off

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