In the first quarter the Iraqi market, as measured by the Rabee Index, decreased by 15%. The market was weak throughout the quarter but much less volatile compared to the unprecedent moves seen in global equity markets in March. The Iraqi Dinar was stable while the price of Brent dropped like a rock down to $23 per barrel, -65% year-to-date. The plunge was initially triggered by disagreement between the two oil majors – Russia and Saudi Arabia, but escalated when markets were shutting down due to COVID-19. ISX volumes remained sluggish as the global crisis hit, and due to the long-term bear market that Iraq has faced.

Iraq has been hard hit on several fronts over the past months. The political landscape remains clouded, low oil prices will slow down government spending and increase the debt burden, and strict measures by the Iraqi authorities have further dampened the economic outlook. Iraq is one of the lowest cost producers in the world and when the oil markets have found its new equilibrium, Iraq will be one of the major players still standing. The action taken to limit the spread of COVID-19 in Iraq has resulted in low numbers of casualties and a soft opening is expected in the coming weeks.

The economic climate in Iraq has been tough over the past years and this year certainly has a grim outlook. But despite all this, we have seen a number of listed companies delivering good long-term growth and trading at very attractive multiples. When this 7-year Iraqi bear market does turn around, we believe it will be worthwhile waiting for.

Domicile: Bermuda
Sources: Bloomberg, Rabee Securities

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