In the first quarter the Iraqi market, as measured by the Rabee Index, decreased by a whopping 14%. The drop was even more jaw-dropping, considering that world, emerging and frontier indices all gained 10-14% and that the price of Brent rallied 24% over the same period. Market volumes remained paltry as the market reached new decade lows. The ISX is now into its sixth year of negative returns, and we eagerly await the turn of tides

The real economy, however, is showing considerable strength. The IMF projects the economy to grow by 6.5% this year, depending on the fluctuating prices of oil, way ahead of a regional average of 1.9 percent. The parliament has also taken a bullish stance approving the 2019 budget which plans an expenditure level 28% above last year. We believe corporate earnings recovery is underway and have already seen a few bright spots resulting in support for share prices. Telecom operator Asiacell announced a 12.2% dividends as a testament of the company’s improving business climate, resulting in a 30% outperformance to the index over the past 12 months. What the stock market needs now a spark to end the negative market trend. Historically we have seen that when the Iraqi market shifts from bearish to bullish mode it creates huge swings of 30% or more in a short period of time, so trying to time the market is not a feasible strategy.

Sources: Bloomberg, Rabee Securities

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