Positive annual figures from listed companies on the Palestine Securities Exchange (PEX) are being sidelined by political uncertainty as waves of protests unnerve Middle East markets, says Chief Executive of PEX, Ahmad Aweidah.
"This quarter was shaping up well until January 25 when the events in Egypt unfolded," said Aweidah in a phone interview with Suite 101 on February 17. He adds that this comes at a time when listed companies are posting strong results for 2010. "Once again, politics is taking precedence over market fundamentals."
PEX market heavyweight Palestine Telecommunications (PALTEL) announced record profits of $110 million and is proposing dividends at 50 cents per share, a return of eight percent. But the results have not attracted enthusiastic trading as might be expected, said Aweidah.
The Al Quds index – which tracks 12 of a total 41 companies representing 80 percent of a $2.8 billion market capitalisation – was at 487.76 on Sunday February 20 opening. At the end of 2010, the index was at 489.60.
Plans for PEX to float have been pushed back as revenues and volumes drop. In 2010, PEX trading volumes were down 3.5 percent from the year previous to around 231 million contracts traded, and transactions fell to 82,625 in 2010 from 88,838 in 2009.
These declining figures saw signs of recovery at 2010 year end, but the latest regional crisis is one of a series of events to hit markets in the Middle East and follows both the global financial crisis in 2008 and the Dubai default crisis in 2009 that led to a $10 billion bailout by Abu Dhabi.
"The exchange recovered fairly quickly from the global financial crisis because we were less exposed to institutional funds, but Dubai sent shockwaves through all Arab markets. We were more affected by the fall of Dubai than even the global financial crisis,” he said, adding that the political strife engulfing the Middle East is likely to have a larger impact still.
The Palestinian Authority, the administration established to govern parts of West Bank and Gaza, saw political leaders resign last week as part of a cabinet reshuffle with elections planned for September. The move comes at a time when Libya and Bahrain are the latest countries in the Middle East/North Africa region making headlines for waves of pro-democratic protests after Egyptian activists ousted President of three decades, Hosni Mubarak on February 11.
The Egyptian protests were themselves sparked by demonstrations in Tunisia after unemployed graduate, Mohammed Bouazizi, committed suicide in mid-December after his produce cart was confiscated for not having proper permits. Anti-government protests have spread across other countries such as Iran, Yemen and Algeria.
"In the long-term, the events are positive. The Arab world can do with more democracy and transparency as well as better accountability because that will have a positive impact on management of the economy, but we will have to live through this transformational period for the time being,” Aweidah said, adding that the Palestinian Authority is unlikely to see internal political strife as a result of the protests.
The sector hardest hit is likely to be tourism, one of Palestine’s main assets, while the country’s banking sector continues to show a strong performance despite the political uncertainty.
Read more about Palestine's economy in 2011.
Anna Reitman - Anna Reitman is a journalist currently working and residing in London, UK, having completed an MA in international journalism (print).
