In the fourth quarter the Iraqi market, as measured by the Rabee Index, decreased by 5%. As we try to remind or investors from time to time, frontier markets like Iraq are one of the few remaining uncorrelated assets in the world. This was proven again during Q4 when Iraqi equities continued to move along its own pace, avoiding mini crashes such registered among global assets classes. However, the year did not turn out the way we had hoped and anticipated. The country has progressed on several fronts over the past quarters and in line with the positive developments 2018 started off with a massive bull market where the index gained over 20% in a few weeks’ time. The rally then faded and the market has since steadily drifted south. However, FMG Iraq Fund has through stock picking added value to investors and it was probably one of the best performing long only equity funds in the world last year.

With a new government in place and a rebounding economy, the stage is set for 2019. The Iraqi public budget revenue increased by 36% for the first 9 months of 2018 and a massive surplus of over $15bn was recorded. Iraq’s GDP growth for 2019 is forecast by IMF to accelerate to 6.5%. The IMF reports: “Higher oil prices and output, as well as an expected increase in investment spending because of the improved security situation, have bolstered Iraq’s economic outlook”. We continue to see a lot of value in our portfolio and believe that in 2019 we should see the return of liquidity to the stock exchange and a rebound in the bombed out banking sector. It might just turn out to be THE year for Iraqi equities…

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