Taking Stock

The Chairman of the Amman Stock Exchange (ASE) is quietly confident that 2018 will be a good year for the beleaguered bourse.

According to ASE data, trading value increased by 25.6 percent in 2017, reaching JD2.9 billion but the number of traded shares decreased to 1.7 billion from 1.8 billion shares in 2016. The net of non-Jordanian investments dropped by JD334.3 million in 2017 mainly due to the selling of Lebanese company Oger Middle East Holding’s stake in the Arab Bank to a group of Arab and Jordanian investors.

The Chairman of the Amman Stock Exchange, Jawad Anani, believes there’s a good chance 2018 will see the bourse reinvigorated with more IPOs and better encouragement of the secondary market, as the economy gradually picks up momentum.

How did the stock market perform in 2017?

It’s a mixed picture. It still pains me to see it. Of course it’s a long-term reflection of what is taking place in the economy. I think there are many shares that are undervalued but people are not willing to take risks. Also, the banks themselves who are very conservative are not investing in the stock exchange. But I think that one of the things to induce investment is that we should encourage the secondary market to do much better. We have not had a single IPO in the last nine years, which is terrible. Even new companies and existing big companies are not going public. They don’t want to go public because they’re worried that if they do, nobody will subscribe. We need to have one, two or three IPOs that would really energize the market. I think we should also reconsider some of the legislation pertaining to the market, like how to handle bankruptcy. We don’t have a routine system to deal with bankruptcies, so companies with toxic assets that have lost most of their capital and are working on a shoestring budget or capital should either fold or restructure.

Based on these trends what do you expect will take place in the market in 2018?

I expect the market to go up in terms of volume and also in terms of prices. It might be one of the bits of good news we see in Jordan this year because the market has bottomed out. The value of shares used to be JD50 billion in the heyday of the stock exchange. It’s now no more than JD18 billion or JD19 billion. So people lost a great deal of wealth and if that can be redeemed, people feel richer. Let’s work on achieving that and not to be victimized by the macro-situation. We hope we can convince some companies to issue IPOs and hope to convince the government that all debt instruments should not be cashed immediately with the Central Bank or with banks. They should go through the secondary market here which gives markets greater width and depth.

You’re an economist by trade. How has the economy been performing overall of late?

Well 2017 was not a very good year. I don’t know what the final figures are for estimated growth because they are not out yet but the government predicts, and the IMF agrees, that growth was about 2.2 percent. But I think it might be a little bit lower than that. What makes me doubt the figures is the enlargement of the size of the informal economy. With refugees staying for a long time and something like 800,000 non-Jordanian laborers are not registered, you have many manifestations of disintermediation of the government. It is estimated that 35 percent of the economy is informal. That means that the tax base has decreased by that amount, and then a large chunk of the economy is not taken into account. Now those people working in the informal sector are probably making money under very difficult circumstances. But if you add those totals up, I don’t think the economy would have grown more than 1.7 or 1.8 percent. Any growth rate that is 2 percent or lower means that per capita income is not increasing. People’s lives in real terms are not improving. Of course, this negative phenomenon is also strengthened by the worsening distribution of income and wealth in the country. More people now are in the lower brackets of the economy and also real wages have not been increasing so there is a feeling that there is an abundance of labor supply. Additionally, you can always hire a non-Jordanian with a lower wage, and there is no desire to increase wages.

Real GDP is projected to grow at 2.6 to 2.8 percent in 2018, according to the World Bank. How likely is this?

Theoretically it’s achievable and it could even be exceeded. What if we began trading with Iraq again? What if the Syrian border is reopened? What if refugees began to return home? These scenarios would all prove hugely advantageous to the Jordanian economy. But what if things do not improve? What if more companies begin to fold? What if more shops and malls begin to suffer? This will impact real estate and trade. So 2.8 percent becomes an optimistic figure. I would put the figure at less than 2 percent if those opportunities do not arise, and the current decline in trade and the expected dec