Date: 18/05/2008

 
Trust in the markets brings increased foreign investment to Jordan

Work is currently underway on the new $100 million Jordan National Financial Center that will be home to the Amman Stock Exchange (ASE), the Securities Depository Center (SDC), brokers' offices and a financial studies center. ASE CEO Jalil Tarif sees the new center as an important step forward for the market but is happy to say that, even its old home, it has been doing well. “After a correction in 2006, we had a good year in 2007 with the index rising by 33 percent and we have started well in 2008 with a 15 percent rise since the beginning of the year” .

It did not initially look as if 2007 would be a good year with the index up just 3.8 percent by the end of September. However, as major companies began to post stronger results, investor confidence picked up and the final quarter brought a strong revival. 
 
The initial public offering  market also picked up in 2007 with 17 IPOS raising a total of JD 397 million ($560 m). The highlight for the year was the successful privatization of the national airline Royal Jordanian, which sold 71 percent of its shares in an IPO that raised JD 184.5 m.
 
The market has certainly been catching the attention of foreign investors and non-Jordanian investment passed the 50 percent mark for the first time at the end of April 2008, when it reached 50.1 percent. “It is a testament to trust in this market, which tends to be less volatile than others in the region” says Tarif. He says the ASE has also put huge resources into public awareness and education in Jordan and this, combined with the stronger interest from institutional investors, has helped to upgrade the market's reputation worldwide.
 
Tarif points out that the ASE has also been a full member of the World Federation of Exchanges since October 2007 and it has an on-going program to upgrade it services. A new Dow Jones ASE Index launched in 2007 has been welcomed as providing a better benchmark of overall market performance as it is weighted by market capital of free float rather than total listed shares, thus moderating the impact of heavy weights such as the major banks and minerals companies.
 
Against this background, Chief Executive Officer Samir Jaradat of SDC suggests that the label "emerging" should no longer be applied to Jordan's capital market. He says it is one of the most transparent in the region, is technologically advanced and works according to international standards and best practice. In fact his ambitions go well beyond developing the Jordanian market and extend to a commitment to improving overall global market integrity. “We want to make a significant contribution to the harmonization and globalization of the securities business” he says, “and this is something we have been calling for at global securities meetings.”

The SDC was established in 1999 under a new Securities law that distributed the functions of the Amman Financial Market among three separate institutions, the ASE, the SDC and the Jordan Securities Commission (JSC). Jaradat says that since its inception the SDC has been committed to working to international standards and to improving global market integrity. Its first step was to develop its own bi-lingual Securities Central Operation Registry Processing and Information Online (SCORPIO) system that now provides a complete solution for the registration, deposit, safe-keeping, transfer of securities ownership and clearing and settlement of securities Enabling users to connect remotely, SCORPIO allows for real-time data verification, uploading and downloading throughout the country.
The SDC has also developed a disaster recovery and business resumption site.

For Jaradat one of the major strengths of the SDC is its contribution to greater market transparency. “Any information that is not confidential, we put on our website” he says “on the principle that the SDC should provide “data for all and not just for sale.” He highlights the addition of data on trades made by members of the boards of listed companies, in addition to board members & representatives' ownership, and names of investors holding a stake of above percent of the companies shares.

The SCORPIO system also provides the basis for a range of services to investors, including a new Members Area Service introduced in 2007 that allows SDC members to view their information on the SDC database to verify its accuracy and request any updates using the SDC Intranet. It also started offering an e-IPO service that allows investors to fill their IPO subscription forms electronically and then print them, an approach that saves time and guarantees accuracy.
 
The ASE also has its focus on the opportunities offered by the Internet and it is planning to introduce Internet trading before the middle of 2008. This will be followed in August by the introduction of a new trading system developed by Atos Euronext Market Solutions and GL Trade, which Tarif says will enhance the technical capacity of the system and build the infrastructure for new instruments the ASE is planning to introduce. The first move is likely to be the introduction of exchange-traded funds that Tarif believes will be particularly suitable for small investors.