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Capital Markets

Erbil stock exchange rivals burgeoning Baghdad

More public-equity funds such as FMG, as well as brokers such as London’s Exotix and New York’s Auerbach Grayson, are looking at business in Iraq. But Iraqi Kurdistan’s decision to launch a stock exchange next year is ambitious. The capitalization of the main Iraq Stock Exchange in Baghdad is only about $3 billion, and trading volume is only about $1 million a day.

Ezat Issa at the Kurdish Regional Government says Erbil has the permission of the federal markets regulator and points to many Kurdistan-based firms that could undertake IPOs, perhaps listing in Baghdad as well. The list includes mobile-phone firms Asiacell and Korek, Erbil-based banks KIB and Cihan, a hotel firm, and cement companies Mass and Bazian, owned by France’s Lafarge. Some are sceptical. Mass Cement Company, for example, tells Euromoney it will wait and see which companies list. But if Iraq’s mobile-phone firms can no longer avoid the listings that were supposed to be a condition of their being granted licences, it will be a big boost for equity markets in Baghdad, and maybe Erbil.

HSBC negotiations with the Iraqi regulator for Iraq’s first securities custody service will make it much easier for funds to invest. Similarly, once a new securities law is passed, the telecoms firms will have one less excuse to delay their IPOs.

The securities law has been drafted but delayed, partly because of squabbling between Iraq’s political parties on the formation of a new government after elections in March. Under the existing framework IPOs involve a convoluted process including newspaper advertisements and paper-stock sales at bank branches.

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