| Kippreport.com

RINGING UP AN INTEREST: Iraq to launch major telecom IPO

January 6, 2013 8:06 by Reuters

An advertisement for Iraq’s stock exchange, running in local newspapers over recent weeks, poses the question: “How can I invest in shares?” It then assures readers that the process is easy, advising them to contact brokerages for details.

 

Another ad, by Iraqi mobile telephone operator Asiacell, warns readers: “Be ready, because we are ready.”

 

Investors will get a chance to buy into the country’s oil-fuelled economic boom this month as Asiacell seeks to raise at least $1.35 billion by floating 25 percent of its share capital on the Baghdad stock market.

 

It will be the country’s largest-ever initial public offer of equity, and one of the Middle East’s biggest share offers in the last several years – the first major IPO in Iraq since a U.S.-led invasion toppled Saddam Hussein in 2003.

 

So it will be seen as a test of investor confidence in an economy that is recovering from years of war, political instability and financial sanctions.

 

Officials hope a successful IPO will galvanise the stock market, luring foreign money into the country and helping make the market a useful tool for Iraqi companies to raise funds for expansion.

 

But the country’s small and undeveloped financial system is lagging its economic growth, and this could hinder Asiacell’s IPO, preventing some of the shares on offer from being sold. The stock market may have trouble absorbing the new supply, and interested foreign investors may find it difficult to move their money into the country.

 

Saad al-Bayati, an economist based in Baghdad, said a weak investment environment because of political instability, unreliable physical security and capital flight from the country would jeopardise such a large IPO.

 

“All these are issues which affect the share market and do not allow for rational economic predictions,” he said.

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