Sunday, August 07, 2005

Iraq Stock Exchange

Brokers trading stocks on the Iraq Stock Exchange (ISX) Trade Floor

With all the violence that has been going on in Iraq, there are a few positive developments that have gone on behind the scenes and have not been widely reported. One of these is the Iraq Stock Exchange (ISX), which has been open for just over a year now, and currently trades shares in over seventy publicly traded Iraqi companies: hotels, construction companies, banks, soft drink bottlers, textiles, pharmaceuticals, transportation, insurance, and real estate companies among others.

The ISX opened for its first trading day on June 24, 2004 with only 15 listed companies, and by December had grown to 78 listed companies. Over the past year, they have undertaken a number of modernization steps, including a project to computerize many of the manual processes running the trade floor, and a recent move to allow brokers to set their own commissions. The Iraq Stock Exchange (ISX) is based on a similar model as the New York Stock Exchange (NYSE): a non-profit entity, owned by its members, and which uses the "open-outcry" system with human traders executing all trades. Perhaps the most interesting difference between the ISX and the NYSE: the NYSE is largely a male bastion, while an overwhelming majority of the ISX's staff are women.

A stock exchange is the great liberator of a free-market economy, the one thing that brings business ownership down to the people. With a stock exchange, any ordinary citizen can own a piece of a company. Here in the United States, millions of ordinary American workers are also corporate shareholders, either directly through stock ownership, or indirectly through mutual funds or pension funds. With the presence of the ISX this becomes possible in Iraq also.

A stock exchange is also an enabler of small entrepreneurs who want to raise investment capital to expand their companies. Rather than having to seek out investors on his own, an entrepreneur may take his company public and sell shares on the open market through an Initial Public Offering (IPO), thereby bringing in valuable investment capital that allows his company to grow. For a fledgling economy like post-Saddam Iraq, one important detail is that investment capital can also come from outside the country: a stock exchange enables foreign entities to directly inject money into the economy, buying shares of domestic companies, and enabling more rapid growth than might otherwise be possible.

For good reason, the launch of the Iraq Stock Exchange has happened with very little fanfare over the past year: with terrorists in Iraq attacking anything they view as a harbinger of modernization or Americanization, something as important as a national stock exchange would make an important target. So, the ISX operates in a nondescript building in Baghdad, and keeps a low profile. But, in the coming few years, this institution will likely become more and more important to Iraq's growth and economic success.

A few weeks ago, I wrote a post called Why I am Bullish on Iraq. Despite all the violence in Iraq, and all the problems, it is developments like the ISX that keep me feeling bullish on Iraq's long-term future.


Iraq Stock Exchange (ISX) Website
ISX Market Data