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FMG Iraq Fund lost 9.4% in the 2nd Quarter of 2017

Despite the progress made against ISIS, the stock market retraced the gains clocked in the first quarter of the year. Volumes were dull, and foreign participation high but mostly on the selling side, especially in the blue chip company Bank of Baghdad, further depressing sentiment. The worst performers were the companies that had rallied sharply in the previous quarter, such as the tier 2 banks. The bright spot in the portfolio was Baghdad Soft Drinks, finishing the quarter flat. The beverage company continued to deliver solid results (10% revenue growth in 2Q17) as it is expanding production capacity and adding new production lines. We also saw some generous dividends and bonus shares ranging from 4-11% for a number of fund holdings.

Looking forward we see a post recovery phase after three years of ISIS terror. The newly won stability will once more set Iraq on a growth path, and with normalised earnings, the stock market should deliver strong returns. In the bond market, investors have already priced in the improved outlook, with government bonds trading at multi-year highs. We believe that the bullish trend of ISX that started last summer has not been interrupted by this quarter´s negative return, and we expect to see a positive momentum return in the second half of the year.

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