After the market reached a multi-year low during the summer we saw a period of stability and a bottom pattern form during the third quarter. Local stocks generally traded sideways while the offshore-listed Iraqi oil and gas companies traded slightly lower. Iraqi bonds strengthened while crude prices were flat, but a strong upward move has been seen at the time of this writing as OPEC decided to cut supply. Technical models might not be very efficient in frontier markets like Iraq, nonetheless we have been getting bullish signals since the beginning of the third quarter and the fund is positioned for a recovery in the market with a concentrated blue chip portfolio and very low cash levels. Our core holding Baghdad Soft Drinks continued to impress, growing revenues and profit before tax by 15% and 30% respectively. The growth prospects for the company remains strong especially as the company is merging with Aquafina which is a quality brand in the purified bottled water products segment.

From a macro perspective the situation is looking brighter with oil prices at higher levels and a deal with IMF in place to help plug the holes in the government´s budget. A three-year Stand-By Arrangement of $5 bn was approved. Also improving the outlook is a successful campaign against Daesh. The final push will be against Daesh in Mosul wish is set to begin prior to year-end, and several leaders have been reported to be fleeing the city as they see it is a lost cause. The liberation of Mosul will not be the end of the Islamic State but it is the beginning of the end.