By Ahmed Tabaqchali (pictured), CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The market continued to build on the November recovery, up +3.0% for the month, with locals picking up the buying interest from foreigners, whose recovery in buying activity in November was mostly a re-investment of dividends and partly fresh inflow.

For the first time in a number of years, the new year outlook for Iraq is brighter with improving fundamentals after a number of extremely difficult years.

Please click here to download Ahmed Tabaqchali’s full report.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By Ahmed Tabaqchali (pictured), CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The dog days of the summer extended from October into the first 10 days of November, as the 40 day Arba’een pilgrimage came to an end, with continued declines in turnover and prices.

This pattern was sharply reversed as buying interest drove prices and turnover significantly higher. The market, as measured by the RSISUSD Index, was up almost +10% by mid-month, with daily turnover almost doubling on the up days as the chart below shows, before settling in at +4.3% as the buying activity subsided.

Please click here to download Ahmed Tabaqchali’s full report.

Mr Tabaqchali is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By Ahmed Tabaqchali. Originally published by Iraq in Context; re-published by Iraq Business News with permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Between February 2017 and mid-October, Rosneft signed a number of deals with the Kurdish Regional Government (KRG) that established for it, and by extension for Russia, a major position as both an investor and stakeholder in the Kurdish Region of Iraq (KRI)’s hydrocarbon resources and infrastructure.

The move was interpreted, especially by the KRG, as implicit support for the KRG in its bid for independence, especially in light of the latest deal signed following the reassertion of Iraq’s federal control over Kirkuk and other disputed territories. While there is an element of truth to this thinking, the deals are part of a wider geopolitical positioning for Russia as a major gas supplier to Europe and as an emerging power in the Middle East.

The deals provide Rosneft, and by extension Russia, effective control of the KRG’s Oil & Gas infrastructure, and a controlling stake in the region’s finances in more ways than one.

Within the oil space it has established this in three ways. The first was by providing USD 1.5bn in financing via forward oil sales payable over 3-5 years. This would be payable in kind from the KRG’s exports, until recently at about 550,000-600,000 barrels per day (bbl/d). However, the loss of the Kirkuk fields takes away about 430,000 bbl/d of production or eventually about half of the KRG’s exports.

This leaves the KRG with a tiny revenue stream after payments to International Oil Companies (IOC)’s, from which to make payments on forward oil sales of up USD 3.5 bn including Rosneft’s USD 1.5bn. A complicating factor is the repayment of other KRG debt, estimated at over USD 21bn by end of 2017, which will have to be factored into debt payment sustainability.

By Ahmed Tabaqchali (pictured), CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

October was mostly a replay of the dog days of the summer as far as the market was concerned.

However, two developments are worth noting:

  • the changed dynamics of oil prices with significant implications for local liquidity; and,
  • emerging details of the Saudi led refinancing of the reconstruction of liberated territories.

Please click here to download Ahmed Tabaqchali’s full report.

Mr Tabaqchali is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

Ahead of the Basra Oil, Gas & Infrastructure Conference taking place on the 30-31 October in Beirut, we caught up with one of the speakers, Ahmed Tabaqchali the CIO of AFC Iraq Fund on the importance of Iraq, the economy and what to look forward to at the event.

Q. Why Iraq is such an important market in the Middle East?

A. The size and quality of Iraq’s hydrocarbon wealth would alone make the country one of the most significant markets in the region. As a consequence of over 35 years of conflict, much of Iraq has not seen any meaningful exploration and thus the potential for significant discoveries is exciting. The rebuilding of its hydrocarbon industry since 2003 has a long way to go, and as such there are enormous opportunities for upgrading the sector across the whole spectrum.

Q. What are the positive implications for the economy and for Basra for the new era of reconstructing Iraq?

A. The reconstruction process will have far reaching implications for the overall economy and Basra in particular with the potential that the associated economic activities to contribute to the development of a diversified economy. The short term effect impact on the economy would be to add fuel to the expansionary economic effects produced by the reversal of the negative forces, i.e. escalating costs of war & collapsing oil prices, that crushed the economy over the last 3 years.

Q. While the Iraqi economy is driven by the state, how do you assess Basra province role as Iraq’s economic capital in driving multiple industries?

A. Arguably, the state’s domination of the economy has stifled the development of both the private sector and regional development in the country. Basra can and should play a leading role in reigniting economic growth given its position as the economic powerhouse of the country. Its rich history & traditions coupled with its mineral & human wealth are significant assets that would allow it to assume this leading role.

Q. How do you at Asia Frontier Capital assess Basra’s role?

A. Personally, Basra has a special place in my heart as it is the burial site of my grandmother since the 1940’s when my grandfather was the governor of Basra, and so I have a bias for the province and its people. It’s worth repeating that its  rich history & traditions coupled with its mineral & human wealth give it an outsized role in Iraq’s future.

Q. What is the role of AFC in Iraq in enhancing projects performance and driving growth?

A. The AFC Iraq Fund, as an investor in Iraq’s equity market signifies AFC’s belief in the long-term economic potential of the country. As long-term institutional investors, we bring foreign capital into the country and contribute to the development of the country’s institutional investor sector, which like much of its frontier market peers is underdeveloped. The long-term horizon of Institutional investors allows them to invest counter cyclically especially during financial crisis by acting as shock absorbers which in the process provides the underlying companies with shareholder stability that allows them to rebuild, grow and expand.

Q. What is your main interest at the Conference? And what are you going to discuss at the Basra Oil, Gas & Infrastructure 2017 Conference in Beirut 30-31st of October?

A. The conference provides an opportunity to meet the players and participants in potentially one of the most dynamic drivers of Iraq’s economy through Basra’s industries spanning oil, gas, power, petrochemicals, infrastructure, construction, transport and logistics. I am hoping to discuss the role and challenges of the private sector in the reconstruction process. Specifically, to explore the role that institutional investors can play as shareholders in infrastructure projects both as an additional source of financing and as contributors to long-term stability as anchor investors.

(Source: CWC)

By Ahmed Tabaqchali (pictured), CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

In spite of the intense international focus, the Kurdish referendum was almost a non-event for the market during the month. Thoughts on the referendum’s implications will follow after the market review.

The month was compressed to just over two weeks of trading due to the Eid and Islamic New Year holidays, while the last 10 days were marked by the start of the month of Muharram, one of the four sacred months of the year.

In Iraq, it has an oversized role as the 10th day of the month known as Ashura, occurring October 1st, marks the start of the 40-day annual Arba’een pilgrimage.

It is estimated that over 20 million Shia pilgrims will visit Karbala to commemorate the martyrdom of Iman Hussein, which was a bifurcation point in the Shia-Sunni divide.

The equity market, as measured by the RSISUSD index, ended the month down -1.9%, as the month was further compressed with average daily turnover down to 3 year lows. Most of the losses took place in the last 2-3 days of the month as buyers disappeared and prices were marked down.

Please click here to download Ahmed Tabaqchali’s full report.

Mr Tabaqchali is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By Ahmed Tabaqchali (pictured), CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The equity market was mostly subdued through the dog days of summer but the big development to note is the realignment of interests of regional players in a post-ISIS Iraq with major implications for the Iraq investment story.

The equity market, as measured by the RSISUSD index, ended the month up +0.2% after trading in a tight range following the July sentiment turnaround, in which extremely depressed bank valuations drove locals to step up and absorb foreign selling as highlighted in last month’s piece on Iraq Business News.

However, turnover continued to be low in-line with the last few months (see chart below) while foreign activity was mostly subdued with some re-emergence of selling in banks in the last few days but, at least for now, that has lost its ability to depress the overall market. The low turnover continues to emphasize the early phases of the liquidity recovery in the economy and the market.

However, the most significant development is the broadening of the realignment of interests of regional players in dealing with the root causes of the conflict, i.e. the deep economic and political disenfranchisement, that were such fertile grounds for the rise of extremism.

Following the military resolution to contain the common threat, these would be long-term solutions which will involve significant investments in infrastructure to bring much-needed developments and create prosperity.

Please click here to download Ahmed Tabaqchali’s full report.

Mr Tabaqchali is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By Ahmed Tabaqchali (pictured), CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The equity market, as measured by the RSISUSD index was down -4.4% for the month, recovering from lows of -10.0%, on further declining turnover.

The average daily turnover for July was about 10% lower than the average of the prior four months in which the market was declining.

The average turnover during the up months, i.e. November-February, was about 1.8 times the levels of those of the down months (chart below) lending support to the bottoming/recovery thesis following the -68% decline from the early 2014 peak to May 2016 bottom.

Foreign selling continued to weigh on the market, but locals tend to appreciate the true values of local assets especially at extreme valuations and, at least now, seem to have acted upon this.

Please click here to download Ahmed Tabaqchali’s full report.

Mr Tabaqchali is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By Ahmed Tabaqchali (pictured), CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

While Iraq’s war against terror is far from over, the conclusion of the Mosul offensive should mark the high point in the cost of war, and its gradual de-escalation has positive implications for the economy that will be explored here.

But first a quick look at the dynamics of Iraq’s economy.  The economy is driven by the state, which derives over 90% of its revenues from oil exports, while its spending dominates all aspects of the economy.  It employs over 50% of the work force and is the largest player in the non-oil economy with its orders/contracts driving multiple industries.

The double whammy of the Da’esh invasion of one third of the country and the collapse of oil prices in 2014 had a devastating effect on the economy as government finances were crushed by soaring expenses and plummeting revenues.

The diversion of resources to a war footing with escalating military spending, escalating spending on IDP’s[i] at over 10% of the population while maintaining basic services forced the government into dramatic cut backs that had knock effects on the economy.

Exacerbating the economic contraction was the fact the economy started a slow-down in early 2014 due to the uncertainties and violence ahead of the elections in April 2014.

The government’s response to the crisis can be seen over three distinct phases almost mirroring the military progress to date: Mid 2014-late 2015 was dominated by shock treatment in response to the severity of the crisis; late 2015-late 2016 saw the emergence of economic strategies to address the crisis; and early 2017 onwards builds on the economic strategies and plans for post-conflict reconstruction and rebuilding.

The table below shows the three phases over the four-year period:

Moreover, the responses were felt over three different categories of government spending; salaries and pensions, oil and non-oil investment spending and military capital spending (military and security salaries included in overall salaries).

By Padraig O’Hannelly.

Following the success of his first article on the Iraqi Stock Market, we are delighted to announce that Ahmed Tabaqchali (pictured) has joined the Iraq Business News Expert Blogger panel.

Ahmed is the Chief Investment Officer of Asia Frontier Capital‘s Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets.

He will be providing readers with comprehensive and detailed reviews of the Iraqi stock market, including his assessment of the economy and business environment in the country.

You can find Ahmed’s latest Expert Blog here, and we look forward to reading more of his perspectives on Iraqi equities.