* Foreigners eager to invest in Iraq's stocks
* IPOs, custodian bank to boost investment on ISX
* Iraq Stock Exchange has capital of $4 billion
By Aseel Kami
BAGHDAD, Oct 20 Foreign investors are
increasingly choosing Iraq's stock market as a lucrative
investment, with the expected listing of the country's three
main mobile phone firms and better regulation seen boosting
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.
The volume of shares traded through to Sept. 30 this year
rose to $495 million compared with $337 million for the whole of
2010, said Taha Abdulsalam, chief executive of the Iraq Stock
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, with a volume of $110
million, while they sold only 7 billion with a volume of $18
million in 2010, Abdulsalam said.
Foreign trading was almost nil 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.
Asiacell, an affiliate of Qatar Telecom , Korek
Telecom, part-owned by France Telecom and logistics
firm Agility , and Zain Iraq, a unit of Kuwait's Zain
, are required to list shares on the local bourse
according to their $1.25 billion operating licences.
The ISX's current market capitalisation of $4 billion could
double once the mobile companies manage to list, 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 a 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
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.
(Editing by Serena Chaudhry and David Cowell)