April 4, 2012 / 4:01 PM / 8 years ago

Palestinian stock exchange makes market debut

* Exchange lists on itself, prices shares at $5.20 each

* Majority owner plans further sell-downs this year

By Noah Browning

RAMALLAH, West Bank, April 4 (Reuters) - The Palestinian stock exchange made its market debut on Wednesday, weathering a year of regional political and economic turmoil brought on by the Arab spring to attract investors for the first of several planned share sales.

The Palestinian Exchange (PEX), which now has 47 companies listed on it with a combined market capitalisation of $2.9 billion, priced its shares at $5.20 each. The stock fell 2.5 percent on its market debut to close at $5.07.

The initial public offering (IPO) of a 1.7 percent stake in the exchange valued it at $41.6 million and raised $707,200 for majority owner the Palestinian Development and Investment Company (PADICO).

PADICO, a fund which aims to boost the Palestinian economy by investing in vital economic sectors, owns more than two-thirds of the exchange and plans to sell a total of 2 million of its shares, or 25 percent of the company, in the coming year.

The move comes as Palestinian economic growth is slowing, with falling donor aid and Israeli restrictions on trade revenues helping to push annual growth down to 5.8 percent in 2011 from a robust 7.5 percent in 2010.

“There has been good growth in numbers in the past few years, but not real growth, since it was driven by foreign aid,” Ahmed Aweidah, PEX’s chief executive officer, told Reuters.

“That’s not the kind of growth we want, but I don’t think you will see a real rebound in the private sector investment before there is an improvement of the political climate.”

The PEX, which becomes only the second publicly traded exchange in the Middle East after Dubai’s Financial Market , hopes more private sector ownership will encourage transparency and improve corporate governance at a time when other markets in the region suffer drastic losses amid popular uprisings.

While exchanges in Egypt and Syria saw the total market capitalisation of listed companies plunge by almost half during the depths of unrest there in the past year, the PEX fell by a relatively modest 19 percent.

“This (listing) puts Palestine on the map of investment and gives a lot of encouragement for investors in Palestine, in the region, and around the world in spite of the division and the occupation,” said Munib al-Masri, chairman of PADICO.

In 2011, the PEX’s Al-Quds index fell 2.6 percent, the third lowest rate of decline among Arab stock exchanges after Qatar and Iraq. Average daily turnover slowed to $1.5 million a day from $1.8 million in 2010.

The Nablus-based exchange, which was founded in 1995 and held its first trading session in 1997, attracted seven new listings last year. Its largest listed company is Palestine Telecommunications, which has a market capitalisation of $1.27 billion. (Additional reporting by Ali Sawafta and Luke Jeffs, Editing by Kylie MacLellan)

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