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French Version

Amman stock market looks to the future in spite of war effects

The sudden downfall of the Iraqi regime at the hands of US troops in Baghdad 10 days ago has its conflicting ramifications on the local economy.
Business with Iraq ceased, while many of the industrial and commercial corporations continue to review their financial situations all the time.

The barometer is the Amman Stock Exchange (ASE). Traders and investors don’t appear to be too bothered as the price index continues to climb high reaching the 180 point-level and over for the first time in more than seven months.
Last Sunday, ASE traders and investors began their week with confidence about the strength of the economy, closing the week’s first session at 181 points with JD 6.2 million in trading volume. Brokers believe shareholders are pleased for the "peaceful occupation" of Baghdad, highlighting predictions of a soon end to the war.

For sure, the American invasion of Iraq does not favor economic growth in Jordan. But economists stress the soon ending of war on Iraq will help the Jordanian economy to overcome any further repercussions. They emphasize the fact that the ASE potency mirrors the powerful stance of the economy.

Observers at the stock market believe the optimistic feeling will continue to prevail among traders and investors as the price index continues to rise, expecting to reach beyond the 190-point in the coming few weeks.

Observers note earlier speculations of the bad consequences of the Iraq war on the local economy now seem weak considering the moderate stances of the Kingdom. "The Iraqi issue has been affecting the Jordanian economy for over 12 years now," said Amer Al Muasher, director of the Brokerage Dept. at Jordan National Bank. "Today, this issue looks less serious on the economy as all sectors have already been preparing for any unforeseen negative developments. It should be noticed here the ASE is stronger today than ever before," he added.

Most of the recent transactions at the ASE were in the industrial and services sectors. Brokers pointed most shareholders believe Jordanian companies will have their portion of the reconstruction of postwar Iraq.

Jordan Cement, Arab Potash and Jordan Telecom are among the shareholding companies to have witnessed demand on their shares. All have registered profits last year and are expected to take part in the reconstruction projects in Iraq.

Arab Bank’s share price also reached the JD 200 level for the first time in seven months. Economist Ibrahim Seif said the war repercussions on the economy "are still irregular", some economic sectors have been affected directly because of the war while others have not.

"There must be more dynamic strategies by the government to induce further growth in the economy and amend the challenges it may face this year in view of the reconstruction process of postwar Iraq," Seif said.

Al Muasher remembers well how the price index at the Amman Stock Exchange started to drop in summer 2002, when the regime of Iraqi President Saddam Hussein defied US demands to resume UN weapon inspections.

"The Iraqi threats at that time were serious on the economy as shareholders and investors started to feel less enthusiastic and more uncertain about the situation," he explained. Then, the ASE price index was standing as high as 193 points.

Eight months later, the stock market is beginning to regain its edge as Al Muasher envisions a return to the 193 point-level in the next four or five weeks. "Companies that have trade with Iraq witness gradual demands on their shares. These companies achieved good results in 2002 and enhanced the ASE’s cash for the moment," the banker pointed out.

The descent in share prices over the past months helped in attracting more of the Arab shareholders to take part in daily tradings. Recent statements indicated the ASE lost JD 6 million in non-Jordanian investments in the first three months of 2003.

Foreign shareholders make about 37.5 percent of the market’s value, estimated at JD 1.5 billion. Arab investments make 28 percent of the ASE’s capital.

Al Muasher’s enthusiasm about the general performance of the Jordanian economy is in contrast to a recent statement by the World Bank, of gloomy predictions for the Middle East economies.

According to Mustapha Nabli, the WB’s chief economist, Jordan is being pushed to the brink of recession as instability and postwar uncertainty is likely to linger on for years.

"Jordan is the most impacted...it is closest to the theater of war," said Nabli, who added the Kingdom’s significant trade with Iraq and tourism have collapsed. Prior to war, Jordan’s economy had been expected to grow by five to six percent this year. "It might lose most of that growth," Nabli said. "Growth might become flat or slightly positive or even negative under some scenarios."

Al Muasher disagrees. "The annual financial statements of almost all the Jordanian shareholding companies are positive. These companies are distributing high dividends to their shareholders, a fact that resounds their financial sufficiency," Al Muasher told The Star.

With one-fifth of the Kingdom’s foreign exports going to Iraq, many economists consider the current halt in trade between the two countries as temporary. Hamdi Tabba’, president of the Jordan Businessmen Society, said the Jordanian-Iraqi trade ties are strong and can’t be cut because of changes in the regime.

As Seif predicts Jordanian companies will relaunch their businesses and in the right direction, others warn it will need a long time before these companies can take the initiative to resume their trade ties with Iraq.

Akram Karmoul, president of the Investor Protection Association, said no specific economic losses have been registered so far. Most of the deprivations were seen in foreign investments. Investors are no longer interested in having businesses in the Kingdom due to the war in Iraq," Karmoul added.

Al Muasher, meanwhile, foresees shareholding companies will gain profits in the first half of this year equal to these made in 2002. With the Americans likely to stay in Iraq for months, the banker believes businesses will develop gradually for the better. "There will be some losses or even misfortunes for some of the companies. But this will be rectified in the second half of this year as companies begin to pick up and rapidly for that matter," Al Muasher went on.

Ghassan Joha
The Star

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