Iraqi Stock Market in the Spotlight

With a market capitalization of about $4 billion, and daily turnover of about $2 million, the ISX is one of the smallest markets in the region. Even after its sharp falls this year, Egypt has a market capitalization of about $56 billion.

Investing in the Iraqi market is still complicated and risky. The ISX lists about 85 companies across sectors such as banking, insurance, services, industry and agriculture. But only about 30-40 stocks are actively traded, and only a smaller number are liquid enough for investors to buy or sell without disrupting the price, according to Sherif Salem, a fund manager at Abu Dhabi-based Invest AD, which has an Iraq-focused fund with about $20 million in assets under management.

Iraq's $115 billion economy continues to be dominated by the oil sector, which provides over 90% of government revenue and 80% of foreign-exchange earnings. But the country's major energy companies aren't listed, depriving investors of one of Iraq's most attractive sectors.

This leaves Iraq's banking sector as the dominant component on the index, accounting for about 70% of market turnover. However, the shares of several Iraqi banks have been subject to lengthy trading suspensions this year because of the regulator's policy of halting trade while institutions are involved in market-sensitive activity such as bonuses or rights issues. Many Iraqi banks have also been seeking new capital this year.

Mr. Salem at Invest AD said that transparency is an issue that has put off investors, though he expects this to improve. Companies are allowed almost six months to disclose their quarterly financial reports, and even when issued the reports in general contain limited information. "This will likely improve with time, and can be overcome if one has a typically longer term view of say five years," he said.