It was a fairly strong quarter for Iraqi equities and the fund outperformed the benchmark as two of our core holdings, Baghdad Soft Drinks and Bank of Baghdad, were the top-performing blue chip stocks. The world’s 3rd largest oil exporter failed to keep pace with the higher oil prices, but we have seen historically that the market tends to lag oil price swings.

2018 was a dramatic year for Iraq with several key events taking place. Security and the financial situation in the country improved significantly. IS was defeated in Mosul and pushed out of Iraq at the end of the year. The reconstruction has begun with the symbolic minaret where Islamic State leader, Abu Bakr al-Baghdadi, first declared the establishment of the group’s rule over Iraq and Syria in 2014. Large swaths of the country´s northwestern territory lay in ruins and the massive task of restoration is underway with Kuwait, Norway, the World Bank and more pledging to help.

The stock market has yet to reflect these improvements, with most local investors still cash-strapped and foreign investors with a cautious approach. But after 4 years of negative returns for the ISX, and winds of change blowing, 2018 could be the year for Iraqi equities. Also, we can´t help but notice that the stock markets negative trend has been broken and that a bottom formation has formed over the recent quarters. Not that technical analysis has been used much when it comes to investing in Iraq, but our models have over the years found the market to be quite trendy.

Sources: Bloomberg