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By Ahmed Tabaqchali, Chief Strategist of AFC Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq Market Report: Supermarkets and Stability

The market, as measured by the Rabee Securities RSISX USD Index, was down 4.2%, and down 2.9% for the year.  The market's decline for the month was magnified by a 2.04% decline in the parallel market's price of the Iraqi Dinar (IQD) versus the USD, which accounted for about half of the index's decline. Apart from that, the actual decline in the index was mostly a function of a directionless and low turnover, market action taking the index to the low end of its two and half year up-trending channel (chart below), which still supports the market's positive technical picture. The macroeconomic fundamentals discussed here six months ago support our view that this uptrend will likely remain in force; however, its upward slope might moderate or even go sideways, as this month's action suggests.

RSISX USD Index versus Average Daily Turnover

(Source: Iraq Stock Exchange, Rabee Securities, AFC Research, data as of November 30^th)

Most of the index's constituents were down, with the exception of Al Mansour Bank (BMNS) which was up 12.5%, Kharkh Tour Amusement City (SKTA) up 7.4%, while the Bank of Baghdad (BBOB) was flat. The decliners were led by Al-Mansour Pharmaceutical Industries (IMAP) down 9.0%, Al-Kindi of Veterinary Vaccines and Drugs (IKLV) down 8.0%, Baghdad Soft Drinks (IBSD) down 5.3%, AsiaCell (TASC) down 4.5%, Iraqi for Seed Production (AISP) down 4.3%, National Bank of Iraq (BNOI) down 2.8%, and the Commercial Bank of Iraq (BCOI) down 2.0%.

Supermarkets and Stability

One of the most promising recent developments in the economy is increased capital investments, by businesses and individuals, brought about by the relative stability of the last five years since the end of the ISIS conflict. While these years were punctured by a number of shocks such as countrywide demonstrations in late 2019, the assassination of Iran's top general in Baghdad followed by emergence of COVID-19 and the crash in oil prices in 2020, undecisive elections in 2021 followed by a year of a political impasse, and most recently political conflict and violence in the summer of 2022; nevertheless, these shocks pale in comparison to those of the prior decades of conflict that Iraq has experienced. Crucially, these shocks were short-lived, and did not lead to self-reinforcing cycles of violence and conflict along the lines of the past. As such, this relative stability provided a more stable and predictable macroeconomic framework for businesses and individuals to operate in, and to plan for capital investments on a scale not seen in the last prior decades of conflict; that in turn, should be sustained by the population's pent-up demand for goods and services to catch up with the rest of the world. These developments were first seen in the immediate aftermath of the ISIS conflict through the revival of long-forgotten social activities, expressed in consumer retail consumption (restaurants, coffee shops, and malls) and construction as reported in AFC Iraq's travel report in the summer of 2019 "Significant Social and Economic Transformation".

Supermarkets are hardly a new development for Iraqis, having known them since the 1980's, and who had access to all the products and goods that are available in supermarkets worldwide since the country opened up to the outside world post the 2003 invasion. However, the relative stability of the past five years has brought with it a revival in the developments of supermarkets, most notably in Baghdad, that have seen increasingly larger-format purpose-built supermarkets.  Two examples of this trend, among others in Baghdad, that have opened in the last two years are Waffir in Inner Kharada Street in Al-Jadria, and the Al Warda in Salman Faiq Street in Kharada. The newer supermarkets do not come only with an extensive product range -i.e. a wide assortment, choice of brands and products including a wide selection of health products, wider aisles, and large spaces, but also provide card (both credit and debit) payment options in addition to the dominant cash payment method - an option that is becoming increasingly available in the city as an acceptable payment method as the gradual adoption of banking takes hold.

The development of supermarkets is likely to be boosted by the injection of foreign direct investments as can be seen by the announcement in mid-October that UAE-based Lulu Group International - with 239 supermarkets and hypermarkets in 23 countries with annual revenues of over USD 8 billion- is planning an IPO to consolidate its regional expansion, and moving into new markets including Iraq, and North Africa. In 2020, the group received an investment of USD 1 billion from the Abu Dhabi sovereign wealth fund (ADQ) to help it expand in Egypt.

The supermarket-sector is not the only sector to benefit from the interest of regional capital, as can be seen from an announcement in late October, that Saudi Arabia's Public Investment Fund (PIF) would invest up to USD 24 billion in Bahrain, Iraq, Jordan, Oman, Sudan and Egypt in key sectors ranging from infrastructure and healthcare to finance and food. Egypt and Iraq are significantly larger markets than the other four and thus should attract proportionally larger investments.

Waffir within Jadria Boutique Mall in Al-Jadria

Inside Waffir within Jadria Boutique Mall in Al-Jadria

Al Warda in Salman Faiq Street in Kharada

Inside Al Warda in Salman Faiq Street in Kharada-Baghdad

Inside Al Warda in  Salman Faiq Street in Kharada-Baghdad

The above photos contrast, with the those below of the somewhat older stores that have narrower isles, with almost all available spaces utilised to offer variety and choice - and as such the newer stores provide an enhanced customer experience. All photos taken by the author during recent shopping trips.

Inside the Green Apple in Jordan Street, Mansour-Baghdad

Inside Mr. Milk in Jordan Street, Mansour-Baghdad

Inside Al Warda in Outer Kharada Street, Kharada-Baghdad

In the meantime, all of these supermarkets are seeing a significant increase in footfall over the last two-years, likely matched by sales, as can be seen from the Google mobility data (below chart) which shows that economic activity, in particular activity in the grocery sector has recovered, 240% above the levels that prevailed pre-2020's great lockdown.

Non-oil Economic Activity in Iraq

(Source: Google, data as of October 15^th October, after which Google will not be updating global mobility data)

Please click here to download Ahmed Tabaqchali's full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the Chief Strategist of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years' experience in US and MENA markets. He is a Visiting Fellow at the LSE Middle East Centre, Senior Fellow at the Institute of Regional and International Studies (IRIS), and a Senior Non-resident Fellow at the Atlantic Council. He is also a board member of Capital Investments, the investment banking arm of Capital Bank in Jordan.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Will Saudi investment pledges in Iraq overcome barriers?

After years of estrangement caused primarily by political reasons, Saudi Arabia is returning to Iraq and looking to invest in its neighbor.

This will likely have significant positive impacts on both countries' economies at a time when Baghdad and Riyadh alike are hoping to diversify away from oil.

But the Kingdom will have to first navigate Iraqi opposition to its investments.

The full article can be viewed here (registration required).

By John Lee.

Saudi Arabia's Public Investment Fund (PIF) has set up a company to invest in Iraq.

The new company is one of six that will invest a total of up to SAR 90 billion (USD 24 billion) in Bahrain, Iraq, Jordan, Oman, Sudan and Egypt.

They will invest in various key sectors, including but not limited to, infrastructure, real estate development, mining, healthcare, financial services, food and agriculture, manufacturing, telecoms, and technology, among other strategic sectors and industries in each country.

(Source: Saudi Public Investment Fund)

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Revival of key border crossing shows shift in Iraq-Saudi ties

A new phase of Iraqi-Saudi relations has begun, marked by efforts to strengthen ties between the neighbours.

In September, the Jadidat Arar land crossing was also opened for Iraqis traveling to Saudi Arabia for the Umrah pilgrimage.

Opening the crossing for even more pilgrims marks a new and symbolic stage of the burgeoning bilateral relationship.

The full article can be viewed here.

Advertising Feature

Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 1st September 2022).

Please click here to view a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD934 (+5.1%) / $816 (+5.1%) (weekly change) (+1.7% and +1.4% YTD change, respectively). The number of week traded shares was 2.9 bn and the weekly trading volume was IQD4.2 bn ($2.8 mn).

ISX Company Announcements

• The National Bank of Iraq (BNOI) has opened its first branch in Saudi Arabia. The bank, which is a subsidiary of Jordan's Capital Bank Group, said the new branch in Riyadh will encourage and facilitate trade between Iraq and Saudi Arabia. In June 2022, Capital Bank Group took in the Saudi Public Investments Fund as a strategic partner with a 23.97% stake. (Iraq Business News)
• Stocks that resumed / will resume trading:
  • Modern Sewing (IMOS) resumed trading on Aug. 28 after holding its AGM (Aug. 24) in which they discussed and approved 2021 annual financial statements and decided to distribute IQD0.10 cash dividend per share, corresponding to a yield of 1.6%.
  • Gulf Commercial Bank (BGUC) and Al -Khazer for Construction Materials (IKHC) resumed trading on Aug. 31 after holding their AGM in which they discussed and approved 2021 annual financial statements.
  • Iraq Baghdad for General Transport's (SBPT) AGM which was planned to be held on August 30th has been postponed due to the lockdown on AGM date till further notice. The company resumed trading on Sep. 1.
  • Ashur International Bank (BASH) will resume trading on Sep. 4 due to disclosing its 3M22 financial statements.
  • Zain Al-Iraq Islamic Bank (BZII) will resume trading on Sep. 4 due to disclosing its 2021 annual financial statements.
• Stocks that will be suspended from trading:
  • ISX will suspend trading of Modern Animal and Agricultural Production (AMAP) starting Sep. 12 due to the AGM that will be held on Sep. 15 to discuss and approve increasing the company's capital from IQD4.1 bn to IQD8.2 bn through 100% rights issue and amending the name of the company by adding an activity of "trade and industry food materials".
  • ISX will suspend trading of Mosul Bank (BMFI) starting Sep. 13 due to the AGM that will be held on Sep. 17 to discuss and approve 2021 annual financial statements, discussing cash dividends distribution and electing seven new board members.
  • ISX will suspend trading of Asia Al Iraq Islamic Bank (BAIB) starting Sep. 14 due to the AGM that will be held on Sep. 20 to discuss and approve 2021 annual financial statements, discussing cash dividends distribution and electing seven new board members.
  • ISX will suspend trading of Commercial Bank of Iraq (BCOI) starting Sep. 22 due to the AGM that will be held on Sep. 27 to discuss and approve 2021 annual financial statements and discussing cash dividends distribution.
  • ISX will suspend trading of Baghdad for Packing Materials (IBPM) starting Sep. 14 due to the AGM that will be held on Sep. 19 to discuss and approve 2021 annual financial statements.

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By John Lee.

The National Bank of Iraq (NBI) has opened its first branch in Saudi Arabia.

The bank, which is a subsidiary of Jordan's Capital Bank Group, said the new branch in Riyadh will encourage and facilitate trade between Iraq and Saudi Arabia.

In June 2022, Capital Bank Group took in the Saudi Public Investments Fund as a strategic partner with a 23.97% stake.

Full text of announcement (Arabic)

(Source: NBI)

By John Lee.

Saudi Arabia-based Jazeera Paints has opened its sixth showroom in Iraq.

The new showroom is in Ranya [Rania], in the Northeast of the Kurdistan Region, which has seen significant economic and industrial development in recent years.

It is close to other towns such as Qaladze, Dukan, Chwar Qwrna, Sangasar, and Hajiawa, and will also, "serve their needs for high-quality paints and construction solutions."

Several distinguished city officials, engineers, and contractors interested in construction and urbanization attended the branch opening.

This is Jazeera Paints' sixth showroom in Iraq; the previous five are in Sulaymaniyah, Chamchamal, Kirkuk, Ramadi, and Basra.

By the end of 2022, the company intends to expand further in Iraq, opening three showrooms in three cities.

(Source: Jazeera Paints)

By John Lee.

Iraq and Saudi Arabia have signed a memorandum of understanding (MoU) regarding the allocation of a grant from the government of Saudi Arabia to finance the renovation of Ibn Al Khatib Hospital in Baghdad.

The Saudi embassy initially announced its support for the hospital last year, following a fire that killed at least 82 people, and left more than 100 injured.

The grant will be provided through the Saudi Fund for Development (SFD).

During the meeting, Iraq's Ambassador to Saudi Arabia, Dr. Abdul Sattar Hadi Al-Janabi, praised the critical role played by the Kingdom through the SFD in supporting the health sector and the infrastructure in Iraq. He highlighted the importance of the present project in enhancing the livelihood of many Iraqis and their access to essential health services.

According to the official Saudi Press Agency, the Kingdom has allocated $1.5 billion for soft loans through SFD to support development in Iraq.

(Source: Saudi Press Agency)

By John Lee.

Saudi Arabia has approved a cooperation agreement with Iraq relating to maritime transport.

The official statement following a meeting of the Saudi Cabinet said simply, "approving a cooperation agreement between the government of the Kingdom of Saudi Arabia and the government of the Republic of Iraq in the field of maritime transport," without giving any details.

(Source: Saudi Press Agency)

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Deep Data: GCC Electricity and Iraq's Reliance on Iran

In connection with the recent Arab summit in Jeddah, Iraq and Saudi Arabia are forging ahead with efforts to connect their electricity grids.

The plan revolves around a new power line between the two neighbors with a capacity of 1 gigawatt (GW). Separately, Iraq and the Gulf Interconnection Authority (GCCIA) are advancing a scheme to power southern Iraq.

While Iraq has long been under pressure from the US and some Arab states to reduce reliance on energy imports from Iran, informed sources in Baghdad characterize the shifts underway as a win-win for all sides-pointing to burgeoning domestic demand in Iran, and the possibilities offered by a new regional electricity market.

The full report can be viewed here (registration required).