Iraq’s Bell-Ringing Blast Effect
The Baghdad stock exchange after a 10 percent 2012 decline started the year with a record $1.25 billion phone company offering which could join with additional cellular company mandatory floats to triple capitalization to $15 billion. The Asiacell transaction was the Middle East’s largest in five years and oversubscribed by Gulf investors alongside the Qatari government-controlled parent. Rabee Securities which targets foreign business was the main underwriter and a Kuwait bank local unit will be custodian after HSBC decided not to provide the service. Mobile penetration is already 75 percent of the population, but the additional listings will diversify from bank domination with thin liquidity. GDP growth will be in double-digits in 2013 on oil production comeback according to the IMF although the central administration and the Kurdish region continue to argue over the decision-making and royalty split. The former is under coalition and sectarian attack with the authoritarian bent of Shia Prime Minister Malaki, who has held the post since 2006 and accelerated an opponent purge since the departure of US ground troops. His Finance Minister’s bodyguards were arrested in an alleged plot, and the civil war in next door Syria has widened clan strife. The Kurds face their own fallout from the conflict as President Talabani who has maintained warm international ties is ill and may resign.
Iran on the other hand has opened a $1 billion trade credit line with Damascus as its bourse is on a 40 percent 6-month tear with a rush into companies such as in petrochemicals benefiting from currency depreciation. The Export Development Bank is under US sanctions for military support and will back consumer good shipments. A separate accord covered energy cooperation as Syria’s central bank reserves are estimated to have fallen two-thirds to the $5 billion range since 2011. The Iranian rial in turn has plunged 50 percent against the dollar since a global commercial and financial embargo was tightened, resulting in the reported resignation of monetary officials. The Health Minister was also dismissed amid controversy over medicine shortages and pricing, and the second phase of subsidies reform was suspended in view of administrative bottlenecks and fear of aggravating 25 percent inflation partially fueled by the massive cash handout component. Bond issues will absorb liquidity, as food costs are up 40 percent on annual basis. According to the IMF and World Bank the economy shrank slightly last year and the 2011 result was recently revised down to 3 percent. President Ahmadinejad, who ends a disputed second term in the coming months, visited Egypt after a long bilateral estrangement to offer assistance and advice as Cairo tries to assemble a coherent transition model with foreign reserves below the critical three months imports threshold. Islamic-style sukuk issuance has been approved to fund the 10 percent of GDP budget gap as pound pushback under the new auction system rings alarms.
