The ASE's head Tarif believes good progress was made this year in the building of a modern capital market infrastructure and the progression towards world standards.
Tarif outlined five areas of progress. New legislation ushered in market segmentation which, explains Tarif, “allows unlisted companies to trade the same day they get a license to operate.” New disclosure regulations that are still in the works, ethics rules for members of the ASE, dispute resolution rules and the ongoing work on a guarantee fund were also implemented. This fund, says Tarif, will be used to guarantee all deals that have taken place at the ASE and will be “definitely useful” in building investor confidence.
The ASE is also moving towards high-tech business solutions with the latest introduction of a live, updated website, displaying up-to-the-second ticker results, and this can be found at www.ase.com.jo.
An improved information dissemination campaign to investors was a “major” event for the ASE, says Tarif.
Samir Jaradat, CEO of the Securities Depository Centre (SDC), the record keeping arm of the securities market, felt some good was accomplished this year with the introduction of new thoughts and methods.
Most importantly, this came in the form of newly introduced electronic trading helping maintain accurate and transparent records.
The SDC also introduced client identification in an effort to regulate the system. “We have to number people to protect their rights,” says Jaradat. Through the system, fictitious names can no longer be used, which can only crack down on illegal trading and increase the legitimacy of the system.
“This has cut the wheeling and dealing,” says Jaradat, which in return, has pressured brokers with insufficient capital to leave the market. “By default, the financially unsound will disappear,” he concludes.
Others privately complain that while Jordan's capital markets might look good on paper, “our house is not in order yet.”
While the infrastructure is being modernized and laid out, particularly from a regulatory perspective, for some, conforming to this new system has been less than satisfactory.
Jordan's capital market is changing but the culture which underpins Jordan's investment community has not, say critics. Beneath the surface it is still the domain of wasta and insider deals, or a village community where business dealings are still too close. Because of this, corporate governance and management practices are still behind the times, they claim.
In terms of disclosure, half year reporting instead of the standard quarterly reporting makes the situation difficult, and investors are not stimulated to make moves on the market.
“Information prompts people to trade,” says Amad, “If we have quarterly results, the market can move four times a year.”
However, even critics agree that a dialogue has begun and that regulators are beginning to think productively and proactively to institute change. A highlight of this process was the creation of the Economic Consultative Council which made several recommendations in October of this year.
Currently, the reform of capital markets regulations is focusing on more stringent disclosure requirements in cooperation with the World Bank. A legislative package of these changes is expected to be presented to Parliament early next year.
Despite the definite improvements and recent momentum, some think the market is still paying for past mistakes.
In the early 90's, when emerging markets were all the rage, institutional investors turned away from Jordan, says Masri, citing the country's unpreparedness for international investing and the short attention spans of international financiers.
Because foreign investor licences were not issued during this crucial period, says Masri, “we missed the boat, and since then, we've been in an indefinite holding period.” This missed opportunity is still a factor in toady's depressed market, he believes.
So while institutional reform has moved ahead, the market lacks depth. A huge gap exists between institutional investors and the small private investor, with no cushion between them to pad the fall.
Taking a step back , “agreements like free trade with the US and the WTO have undoubted positive impact,” says Masri, but in terms of ongoing reform, “implementation has been difficult, and we're on a learning curve.”
“Also, we're implementing these changes in one of the worst times of our economic history.” ¯ (Jordan Times)
By Owen Clegg
© 2000 Mena Report (www.menareport.com)
