Perfect storm for Palestine Exchange

27 June 2011

London roadshow tells story of undervalued stocks paying off

Palestine’s bourse is weathering the Arab uprisings with remarkable resilience, increasing listings in a tough capital-raising climate and reintroducing plans for an initial public offering (IPO) in the fourth quarter.  

Speaking at an annual roadshow at the London Stock Exchange, which followed stops in Abu Dhabi and Dubai, chief executive officer (CEO) Ahmad Aweidah said that the Palestine Exchange (PEX) has the highest dividend yield curve and lowest price equity curve of all Arab exchanges. That could mean a ‘perfect storm’ of high cash yields with substantial potential for capital appreciation.

This, combined with successful listings such as telecom operator Wataniya Mobile early this year, is expected to draw more than a passing glance from investors seeking untapped markets.

“We have the numbers … 22 of 46 listed companies paid generous dividends,” says Aweidah. “Everybody told us the Wataniya IPO was the wrong time, but it managed to bring in almost 15,000 new investors and was oversubscribed in two weeks.”

Future IPO candidate Amaar Real Estate is planning major projects in West Bank city Ramallah as part of a $1.5bn programme, including a financial centre to serve as headquarters for corporations, such as Bank of Palestine, Al-Quds Bank and Athens-based construction firm Consolidated Contractors Company (CCC).

Although violent uprisings in other countries across the region have toppled governments, they are generating interest for access to technology and the wider world, particularly among youth – more than 40 per cent of the population in Gaza and the West Bank is under the age of 15. And it is a youthful population driving growth for market heavyweight Palestine Telecommunications (Paltel), according to its CEO Ammar Aker.

“So far this year, Palestine’s internet usage has already surpassed all of 2010, people are using social networking, Facebook, watching videos more, telecom services are growing everywhere in the world and our market remains underpenetrated,” says Aker.   

Still, foreign investors, largely from the Middle East, comprise less than 5 per cent of all shareholders, although foreign investment represents 42 per cent of value. Whether or not PEX or its listed companies make it into the portfolios of the event’s registered institutional investors – the US’ JP Morgan and Blackrock, and Germany’s Deutsche Bank to name a few – remains to be seen. But the undeniable momentum, backed by clout from the London Stock Exchange, makes a compelling argument at a time when frontier markets are on the radar screen.

At the very least, the exchange is set to make more noise globally. Its membership status in the World Federation of Exchanges was bumped up a notch last week and the management is now focusing on MSCI, FTSE and S&P indices’ acceptance.

In 2011 to date, the Al-Quds index was last at 497.8, up 1.7 per cent, and value of traded shares is down to $218.7m, compared with $276m for the same period in 2010.

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