Iraq is expecting to open the Erbil Stock Exchange (ESX) this year.

“This is still in progress. We hope during this year the Erbil exchange will be activated,” says Abdul Razzak al-Saadi, chairman of the Iraq Securities Commission (ISC).

The ISC granted the Kurdistan Regional Government (KRG) a licence to set up the ESX in February 2010. At the time it was planned as a standalone Kurdish exchange. “For the time-being it is not a separate exchange, it is a joint venture with Erbil,” says Al-Saadi.

The exact nature of the ESX will be determined by the new KRG administration, which is in the process of being confirmed by recently re-appointed prime minister Nechirivan Barzani.

The ESX potentially poses a less daunting entrance point to Iraqi stocks. It could attract more foreign investment into Iraq’s capital markets. One Iranian stock broker keen to tap opportunities in the ESX told MEED that trying to get through to the Baghdad bourse is “a nightmare’’.

But there is fear that the ESX will be too heavily focused on Kurdistan and exclude opportunities for the rest of Iraq. According to the ESX website, 20 per cent of available shares will be allocated to KRG entities, 13 per cent to traders and the rest will be held by private sector companies.

The market capitalisation of the ESX will be $10m, a fraction of ESX’s $4bn.

If the launch proves successful, the ISX will look to set up a branch in Basra also Al-Saadi confimed.