Following a two-and-a-half-week hiatus, trading at the Palestine Securities Exchange (PSE) in Nablus resumed on Tuesday, October 17. It had been suspended on October 1, when rioting spread like wildfire through the Palestinian territories in the West Bank and Gaza. But, with the violence continuing unabated, trading time was cut by almost half, with the pre-open stage running from 9:30 A.M. to 10:00 AM, and the open stage from 10:00 A.M. to 11:00 A.M.
Unsurprisingly, the unstable political and security situation served to suppress both prices and volume of shares traded at the bourse. The week before the riots began on September 28, the PSE's Al-Quds index had risen 5.6 percent to close at 260.98, outperforming most of the markets in the region. But, after 17 days of closure and four days of limited trading, it was down to 231.19.
"Obviously, the situation in the territories has had a most significant effect," said Samar Badis, a deputy manager at the Nablus-based Target Securities Company, in conversation with Albawaba-MEBG. "Just about every stock has been affected. With the degree of uncertainty that exists at present, investors are more interested in basic subsistence, rather than trading in shares."
While the initial reason for halting trade at the PSE on October 1 was in solidarity with victims of the Intifada, there were other extraneous reasons for the closure. The internal shutdown of the West Bank by Israeli forces, which prevented the move of Palestinians between areas where Israel has security control, prevented PSE employees from getting to work.
Employees of the member brokerage firms who live outside of Nablus found themselves in a similar situation. Many investors found it difficult to contact their brokerage firms or to place their orders. Furthermore, frequent electric power outages made trading difficult.
"Foreign investment on the PSE has practically dried up completely," said Badis, who explained that prior to the recent violence foreign investment was running at about 10 percent of the total amount traded at the bourse, with the bulk of that amount being institutional. She added that she expects very little change in that characteristic before the general situation stabilizes.
Furthermore, there are likely to be few public offerings in the immediate future. "There was one IPO that was completed successfully just before trouble started," Badis said. "Right now, anyone else considering an IPO is likely to wait until the situation is better."
When it was created in early 1995, the PSE was seen as a foundation block of the Palestine capital market. Given the dispersal of the Palestinian people and the concentration of personal wealth abroad, it was believed that the PSE would act as intermediary to facilitate and maximize the repatriation of long term investment capital to the economy.
The PSE was incorporated as a private shareholding company, with the Palestine Development & Investment Company (PADICO) and (SAMED) as its major investors. After the Palestinian National Authority approved a PADICO-sponsored design and work plan in July 1995, a project team was put together by the PSE and entrusted to establish a fully electronic exchange and depository.
EFA Software Services, a Canadian Company, provided both the trading and settlement & clearing systems. By August 1996 the Exchange was fully operational and on November 7 of that year, the PSE signed an operating agreement with the Palestinian Authority, allowing for the licensing and qualification of brokerage firms to take place. On February 18, 1997, the PSE conducted its first trading session. Twenty-eight shareholding companies were approved for listing. — (Albawaba-MEBG)
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