In a market that has stagnated near bottom for nearly a decade, many analysts believe the Amman Stock Exchange will either continue on its path, or more optimistically, go up, because there is little else it can do.
With many investors burnt by American stock markets and the unexpected losses at the PSE, the ASE with its undervalued stocks is increasingly looking like a good bet, say some investors.
They argue this is particularly true as local investors have greater insight and access to information on domestic companies than on foreign markets and should therefore be better positioned to invest. This is only added to the fact that the many undervalued funds are available at bargain prices, say analysts.
For its part, UFI sees good opportunities in the market in the coming year — even if the market itself stays flat, selected shares may do very well.
“There are some attractive companies with good performance,” says Amad. “They have adjusted to the embargo [on Iraq] and penetrated new markets, gained profit and they continue to thrive.”
Amad looks towards specific companies in the pharmaceutical, banking and service industries to do well.
He also thinks that recent losses in the Palestinian market will lead to more confidence in Jordan's market. “They tried to invest, discovered a lot of turbulence and lost some faith in the future of the Palestinian economy,” he says.
For its part, “AIG is more optimistic about the market and believes something positive will come soon,” says Masri, while also careful to point out the fickle nature of the Middle East when making forecasts.
Masri also acknowledges the market is very near “rock bottom” and is likely only to go up in coming months, but he also believes a number of high-profile bankruptcies are on the horizon, centred around organizations that have been kept artificially afloat for too long.
As a result, many in the investment community are still bracing for this potential shake-out.
On the administrative front, ASE officials are working on forging alliances and increasing links with other regional stock exchanges in the coming months, particularly in the Gulf.
Should this arrangement bear fruit, investors will be offered greater accessibility to other markets and in return, more investment will be made available to domestic companies, a situation that can only help the ASE.
The Iraqi question
Increasingly there is optimism over ties with Iraq, the country's leading trading partner, and the hopes that trade sanctions will soon end. Because the stock market is so closely tied to the economy, the expectation is that this development will ultimately turn the stock market around.
Since the crash brought on by the 1990 Gulf War and the resulting sanctions, Jordan's capital markets have been on hold, says Masri. Despite the artificial bubble created by the huge influx of capital from returnees from the Gulf Crisis, too much money was chasing too few stocks. By 1993, things fell apart, he says.
“[The period] 1993-94 was a reality check — our largest export market disappeared overnight,” says Masri, “and our industrial sector was very unprepared to shift from Iraq.” Since then, many are still on life support and their stock performances have been testament to this.
ASE head Tarif thinks that the trade to begin with Iraq in 2001, “will give more flexibility to the industrial sector,” and help the overall economy. He also thinks high oil prices will bring more funds into the region and this can only help Jordan, providing more growth and opportunities.
UFI's Amad already sees improvement, “the oil-for-food agreement has already allowed our industrial sector to begin exporting to Iraq ... and it has helped some companies get on their feet after 9 years of embargo.” As a result, a “temporary reaction” occurred as markets went up, but this was not sustained, says Amad.
He also adds that companies once known and respected for their performance in pre-sanction days are only shadows of themselves, and regardless of the lifting of sanctions, will never return to past glories as they lost too much ground over the years.
While many hope things will change overnight, Amad expects a slow, gradual end to sanctions. ¯ (Jordan Times)
By Owen Clegg
© 2000 Mena Report (www.menareport.com)
