Palestinian stock exchange IPO latest hint of revival

The Palestinian stock exchange's initial public offering next month would make it the second publicly listed bourse in the Arab region. Jaafar Ashtiyeh / AFP

The Palestinian stock exchange is planning an initial public offering next month, which would make it the second publicly listed bourse in the Arab region and the latest sign of a renaissance in Middle Eastern markets.

The Palestinian Exchange (PEX) boasts a market capitalisation of US$2.84 billion (Dh10.43bn), with 46 companies listed from five sectors: banking and financial services; insurance; investments; industry; and services.

"Arab governments treat stock exchanges as symbols of sovereignty, and that has become more of an outdated idea," said Ahmed Aweidah, the bourse's chief executive, who went on a roadshow last year to convince Palestinians around the world to invest in the exchange.

"Globally, if you look at the world federation of stock exchanges, about 70 per cent of its membership are publicly traded companies, and this is the direction everybody is going," Mr Aweidah said.

The Palestinian stock market, which is majority-controlled by the Palestine Development and Investment Company, will list its shares on April 4.

The move was made possible after it underwent regulatory changes last year to transform its ownership structure from a private to a public shareholding company.

According to regulations set by the market watchdog, the number of publicly traded shares needs to move from 4 per cent on listing to 25 per cent.

"We are floating it to increase shareholders and diversify our shareholder base," Mr Aweidah said. The listing will also ensure that the exchange is more agile, more efficiently managed, because we have a board, shareholders and a regulator to answer to."

About $2 million worth of shares change hands daily on the PEX, which takes a commission rate of 0.002 basis points on both sides of each trade.

The listing follows a spate of positive developments for Arab stock markets as liquidity increases and appetite for riskier assets improves after a dire period last year, when popular uprisings from Tunisia to Syria kept investors on the sidelines.

"We would like to see further privatisation of the stock markets in the region, which would bring more transparency, stronger corporate governance standards," said Haissam Arabi, the chief executive of the asset manager Gulfmena Investments. "It would also compel bourses to look at the sector from a business, commercial point of view rather than a government public sector perspective."

This year, Kuwait made strides to privatise its stock market. The country's market watchdog, the Capital Markets Authority, hired HSBC in January to advise on an IPO under which 50 per cent of the bourse could be sold to Kuwaiti citizens, with the rest sold to companies listed on the bourse.

Sultan Al Mansouri, the UAE's Minister of Economy, on Tuesday said he hoped a decision on whether to merge the stock exchanges of Abu Dhabi and Dubai would be made by the end of the year, after the Dubai Financial Market General Index rallied as much as 27 per cent this year.

The index has pared some of its gains, but is still up 22 per cent.

Dubai Financial Market, the company that controls the Dubai exchange, is the only publicly listed stock market in the region.

Tunisia will welcome five companies seeking capital for expansion to list on its exchange, after the Tunis Index rose 10.5 per cent in the second half of last year, even after a revolution, versus a 7 per cent decline for Arab markets.

"At the advent of a bull cycle, now is the time to modernise laws, rules and regulations to hope that the infrastructure is ready and we are on strong footing for another market cycle," Mr Arabi said.

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