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The new road for Damascus
Syria’s stock exchange barely registers 100 transactions a month. But efforts to attract more firms to list could help lift the profile of the fledgling bourse.
March 10, 2010 10:53 by Katherine Azmeh
When trading started on Syria’s first stock exchange in March last year, it seemed to mark the death of the old state-run economy. And as the Damascus Securities Exchange (DSE) celebrates its first birthday this week, Syria appears to be emerging from its long isolation, to play an increasingly important role in the region’s financial markets.
From oversubscribed IPOs to liberalized regulations governing foreign investment, a more favorable business climate in Damascus is generating enthusiasm and revealing the willingness of Syrian investors to fund foreign entities.
“The Syrian market is witnessing significant growth as a result of the continuing economic reforms which have resulted in the liberalization of the regulations governing investments by local private sector and foreign investors,” says Adnan Ahmed Yousif, CEO of the Bahrain- and Dubai-listed Al Baraka Banking Group.
Despite a sluggish end of year performance by Syria’s newly lauched bourse – December trading sessions often scarcely registered 100 transactions – investors are displaying a renewed enthusiasm amid incentives to attract more companies to the DSE.
Bashar al-Assad’s government appears ready to embrace opportunities to invigorate the nascent financial markets, but looking at measures to boost trade volumes and liquidity on the DSE, and reduce barriers to foreign investment.
In an effort to attract more companies to list on the exchange, regulatory authorities in December reduced capital requirements from $6.5m to $2.5m. Some analysts suggest, however, that it is the accountancy requirements of listing that present the greatest barrier to entry for many Syrian companies. Currently, the DSE lists 12 companies – up from the inaugural six – seven of which are financial institutions with established accountancy practices. Clearly, attracting more listings is crucial to invigorating the market.
“Doors are opened to investors without obstacles and investment in Syria is an investment for the future,” contends Adib Mayyaleh, Governor of the Syrian Central Bank.
Mayyaleh maintains that the Syria is actively working to liberalize its foreign currency policies in anticipation of realigning itself with global economies
This will be of critical import, as current DSE regulations require foreign investors to establish Syrian deposit accounts, from which transaction monies are withdrawn. Non-Syrian investors are obligated to maintain their holdings in a custodial account, through brokers licensed by the Syrian regulatory authorities. Foreigners must maintain their holdings for a minimum period of six months.
Imposed restrictions on share value fluctuations are also present, although regulators have indicated that they represent temporary protective measures.
In an interview published Tuesday in Qatar’s Al-Sharq newspaper, Mayyaleh noted the strengthening presence of Qatari banks in Syria, and the country’s efforts at stabilizing the local currency. Last August’s SYP1.7bn ($37 million) IPO by Qatari National Bank Syria was heavily oversubscribed, with the bank announcing bids in excess SYR4bn ($87 million). Later in the 2009, Al Baraka Bank’s Syrian operation announced that its initial public offering of $35 million received bids in excess of $165 million.
“The Syrian economy is moving strongly toward diversity and creating a basket covering all sectors, and the value of the Syrian pound exchange rate is stable now after the pound was disengaged from the US dollar,” Mayyaleh added.