According to a report from Reuters, with better regulation and the expected listing of the country's three main mobile phone firms, foreign investors are increasingly choosing Iraq's stock market as a lucrative investment.
Iraq's bourse is still tiny in comparison with other regional or international stock markets, but a drop in violence since the peak of sectarian fighting in 2006-2007 and the scope for quick growth is lifting interest.
Taha Abdulsalam, chief executive of the Iraq Stock Exchange (ISX), recently announced that the volume of shares traded through Sept. 30 this year was $495 million compared with $337 million in full-year 2010.
The ISX, which started operating in 2004 and currently has 86 listed firms, is one outpost of private investment outside of the oil industry in a country still dominated by state firms.
The number of shares foreign investors bought through to end-Sept. this year was 66 billion, valued at $110 million, Abdulsalam said. Foreign trading was almost non-existent a few years ago.
Russian-based 55 North Company is a bold example of foreign appetite in the ISX.
The firm plans to establish an investment fund worth $25 million, its managing director Paul Collison said, the maximum it can invest right now due to the low level of liquidity in Iraq's stock market.
"It is important to start early on... it is a fantastic opportunity for a small fund to get established," he said.
Panu Saukkonen, a senior partner at Finnish Virtus Capital Oy Company which started investing in the Iraqi bourse three years ago, said Iraq was a great choice to invest in as there is no serious competition and market values are still low.
The three mobile phone operators, Asiacell, Korek Telecom, and Zain Iraq, are required by the terms to their licences to list shares on the local bourse, and this could see the ISX's current market capitalisation of $4 billion double, Abdulsalam told Reuters last week. .
Oliver Emanuel, executive director of Middle East and North Africa sales and trading at Morgan Stanley, said the initial public offerings by Iraq's mobile phone firms would give a great boost to the local market.
"The upcoming telecom IPOs will no doubt act as a catalyst for the Iraq stock market precipitating greater focus by international and regional investors, helping improve liquidity," Emanuel said.
Investors said the implementation of some regulations such as custodian bank services and share trading settlement could further open the market for more foreign capital.
A share trading settlement would allow non-Iraqi investors up to two days to arrange their payment after making a trade, compared with currently having to pay before conducting a trade.
Saukkonen said having a custodian bank could boost its investment by at least 10 times within three years.
The head of the Iraqi Securities Commission (ISC), Abdulrazaq al-Saadi, said custodian regulation would be issued in November.
The ISX moved from manual to automated trading in 2009 and is open for trading for two hours a day, five days a week. Each trade takes around 8 seconds to process.
The banking sector is the largest on the bourse, which also lists industrial, insurance, hotel and agriculture firms.
Collison said he expected the ISX to grow quickly once an international bank takes on the custodian role but said the market would need to be closely monitored.
"The risk is you get a very quick bubble and it will lose 50 percent and that is exactly what happened in places like Russia," said Collison.