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French Version

ASE walks tightrope despite growth, performance drops as shareholders withdraw

Economic observers are casting a dark cloud over the ASE as share prices slip below the redline. ASE’s transactions are faltering and way behind achieving progress as investors and shareholders wait for the 2000 financial statements of shareholding companies in the market.

ASE experts, meanwhile, reiterated the political situation in the region is not the cause behind the price index slump. Only the industrial sector, experts say, is still suffering from the current political situation, mainly in Iraq and the Occupied Territories, a reality that affected the performance of most of the industrial shareholding companies at the ASE. Only pharmaceutical companies have made considerable profits last year.

Jordanian economist Ziad Al Basha warns the stock market is likely to collapse unless structural changes are made soon. “The ASE’s problem is its low turnover and profits,” Al Basha told The Star. “These elements hinder enthusiasm among investors and shareholders to participate in ASE’s daily transactions.” A recent study by the Middle East Capital Group (MECG) on the performance of Arab stock markets in 2000, revealed however, the ASE registered a 4.1 percent growth this year after a 20.5 percent decline last year. Nasser Al Amad, a close observer financial exchange, agrees the stock market succeeded in motivating some local and Arab investors to take part in transactions as neighboring Arab stock markets failed to do so. The MECG study revealed stock markets in Egypt, Lebanon and most of the Arab Gulf states continue to suffer from serious relapse this year. Al Amad said the humble growth of ASE this year was a result of a U-turn in investors’ decision-making policies.
“Many new portfolios were created at the ASE, which helped a lot of investors, both as groups and individuals to make use of the sliding prices in the market and buy hundreds of shares in certain sectors, including service and industrial ones,” Al Amad added. Dr Henry Azzam, chief economist at MECG, said the study showed the price drop in ASE’s shares last year provided suitable ground for investors to buy shares in the past three months. Amid the proposals put forward to revamp the ASE’s performance is to open the door for the Jordan Telecom Co. (JTC) and IT companies to have their shares listed on the stock market. Al Amad noted JTC’s privatization has narrowed opportunities to enter the stock market, as France Telecom, which holds 40 percent of the company’s shares, is against the idea.
“The French administration fears the trading of JTC’s share in the stock market will affect the company’s performance and may hinder its sustainable growth of profits,” he explained. Azzam, member of JTC’s board of directors, denied the idea was suggested before by the company’s directors but noted it could be implemented in the future.

As for IT companies in Jordan, the three experts agree it’s premature to enter the stock market. “These companies still don’t have a potential growth rate in their operations,” Al Amad explained. Hence, “they need to merge with larger IT consortiums to qualify them for entering the ASE.” Al Basha, however, has his doubts. “The trend of the Amman stock market is very low,” he pointed out, adding that “the market will remain so for the whole year unless its directors identify the structural problems facing it,” Al Basha said.
ASE came sixth among the Arab stock markets that made progress in their performance this year. The highest is the Tunisian market with 21 percent, followed by Saudi Arabia that registered nil growth in 2000. The study found total transactions at the ASE in the past three months has reached JD 60.2 million, with an increase of JD 20 million over the same period last year. The market’s price index also raised by 5.38 points over last year. ASE’s gross market capitalization is valued in March at JD 3.62 billion, about 42 percent of which are owned by non-Jordanian investors. Banks are the highest among the sectors with JD 1.93 billion in capitalization, followed by the industrial sector with JD 1 billion. While many see in the Amman Stock Exchange a reflection of the overall performance of the economy, Azzam pointed out one should differentiate between the performance of the shareholding companies and the share prices inside the market. “Share prices are subject to supply and demand, while the companies’ performance depends on their transactions throughout the year,” Azzam explained. Al Amad, on the other hand, noted the recent fall in interest rates at Jordanian banks encouraged shareholders and investors to trek into the market. Information provided by "The STAR".

Ghassan Joha
The Star

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