After the stellar run in the first quarter, the sentiment turned sour and the selling was relentless across most sectors. The index is now back to the lowest levels seen over the past decade, however, the fund continued to add alpha by staying concentrated and focused on quality companies. The market remains shallow and a few sellers can and have dragged the market sharply lower. Equally, a few buyers would be able to lift the market sharply higher, as seen in the first quarter of the year. The banking sector bore the brunt, and most stocks are now down 30-50% year-to-date. All of the liquid blue-chip banks are trading below book value. Although earnings have yet to improve much for these companies, we have been adding to select core banking holdings as we see value in several names and growth returning over the coming quarters.

After the May 22nd parliamentary election, where there was no clear winner, the political blocs have been forming an alliance in order to try and reach a majority of seats in parliament. The final shape of the new government is yet unclear, but its cross-sectarian composition bodes well for the future. The new government will be facing several challenges. But with greatly improving economy for the government due to the defeat of IS and higher oil prices, Iraq has returned to growth and is underway with the reconstruction work. Iraq´s oil production has remained at around 4.5m bpd throughout the war against IS, but there are now plans to expand the export capacity by another 2 m bpd, which would greatly contribute to future growth. In general, there is a more positive atmosphere in the air, but Iraqi stocks have largely failed to reflect the change, yet.