Meliah Lore Opinion Piece: The ISX is about to get "Flipped Around"!
Good morning Dinar Updates,
As I was waking up this morning, I decided to do some investigation into the ISX and what July 1st, 2014 might do for the Iraqi economy and (POSSIBLY) the value of the dinar.
This is just an opinion piece...this is not investment advice. This is for educational purposes only, so please, consult your own financial planner.
"The Iraqi Stock Exchange Is About To Get Flipped Around!"
I'm not a conspiracy buff, but as a realist, I know that money makes the world go round. Most countries are actually corporations (Excerpt from Wikipedia: "A municipality is usually an urban administrative division having corporate status and usually powers of self-government or jurisdiction."). Where there is a corporation than there are members and money!
So as I looked at the data from the ISX it became clear to me that IN MY OPINION this is Iraq's Stock Exchange's "March of 2009".
DO YOU SEE IT!!?! The two "valleys" at the right of the chart!?? A DOUBLE BOTTOM!?
I believe that there is a double bottom forming that, IF not taken out, will increase the ISX by at least 20% by the end of the year.
The "crisis" of the last two weeks created an environment where the "big money" can move into the ISX (as it opens globally) and make MASSIVE gains from the bounce back!?
The index had an important "bounce back" and minor correction already:
The index fell from 107.88 (June 10th) to 95.64 (June 16th)...that's 11%!!!!
It then bounced to 101.73 on June 19th...a gain of a little over 6%!
In a little under two weeks, the index moved a total of 17% in both directions!
Now since then, the price fell back near the low of June 16th and is at 96.51 right now...BUT IT NEVER TOOK OUT THE LOW!
What do you see? I see the same bear market that hit the U.S. JUST BEFORE the bottom on March 9, 2009!
I believe that the ISX will go back up to the 120 area sometime in the next six months...I can't see how ANY foreign investment and/or company activity could survive in the country if the index drops any lower! That is my humble opinion.
NOW, I STATE THIS AGAIN, I'M NOT INVESTING IN THE ISX OR ANY COMPANIES IN IRAQ, AND I DON'T RECOMMEND IT!!! But what I do own is their currency, which (in a free market economy) is valued based on factors like: inflation, interest rates, bond offerings, industrial growth, gross domestic product, consumer prices and spending, taxes, foreign investment, asset holdings, etc.
So, a turn around in the ISX would LIKELY create an environment where that SHOULD bring a turn around in the value of the Iraqi Dinar...POSSIBLY!
Join me in watching the ISX price index with great anticipation to see if the double bottom holds, and if the index enters into a bull market rally or dips further into stock valuations of a broken economy!?
Thanks for your time...peace and blessings to you all!
Last edited by meliahlore; 06-28-2014 at 06:05 PM.
Re: Meliah Lore Opinion Piece: The ISX is about to get "Flipped Around"!
In general foreigners contributed less than 20 per cent to the total trading volume. But there was one significant exception when in April 2009 the trading volume of non-Iraqis (81 billion ID) represented 77 per cent of the total volume. Their trading activity was almost entirely concentrated on the shares of the Bank of Baghdad (Iraq Stock Exchange, 2009, p.4).
Considering that many large international stock markets suffered heavy losses during this period, it is quite miraculous that Iraq was able to escape the global stock-market bust. Fourth, apparently the bubble burst in the summer of 2009. Trading continued but the ISX does not report index values for July and August 2009. Then the index was reweighted as many companies left the market. Thus, it is difficult to compare the values before and after September 2009. After that it never reached again a value of more than 150.
And most curios of all
The effect of exchange rates is ambiguous. On the one hand, depreciation increases the competitiveness of an economy. This should lead to increasing stock prices for exporting companies. In contrast, stock prices of importing companies should decrease as a depreciation of the local currency leads to higher input prices and diminishing profits. This is the view of the study of Pan et al. (2007). However, this is only the case if demand for those products is elastic (Rahman et al., 2009). One can question that assumption in the case of Iraq. First, the demand for oil, which is the most important export good in Iraq, is inelastic in the short run. Second, the most important sector in the ISX is the banking sector. Thus, a depreciation of the IQD could also have a negative effect on the ISX index. Moreover, an appreciation increases returns of stocks expressed in foreign currency. Thus, it may make the stock market more attractive, especially if an appreciation is expected. Several studies look at the relationship between exchange rates and stock prices and find both positive (Wongbangpo and Sharma, 2002) and negative correlations (e.g. Choi, 1995; Kim, 2003) as well as no relationship between those variables (e.g. Nieh and Lee, 2001).