Four years after Tunisia sparked off the Arab spring uprisings, the country is seen as a rare regional success story, but its prospects hinge on it deepening reforms and attracting foreign investment.
The North African country of 10 million people suffered its share of political and economic woes after the 2011 revolutions that swept much of the Maghreb and the Middle East, toppling several long-standing leaders including its own Zine Al Abidine Ben Ali who fled Tunisia four years ago last week.
But Tunisia's democratic election last year and a surging stock market are a contrast with the bloody turmoil in neighbouring Libya and Egypt.
So much so that Tunisia has just kicked off investor meetings for a Eurobond, its first standalone post-Arab spring deal that will come without US guarantees.
While the bond will be a key test of investor appetite, Tunisia's stock market has already reaped the benefits of political stability. The Tunis index rose more than 16 per cent in 2014 and trades just 10 per cent below record highs hit before the Arab Spring.
Joseph Rohm, portfolio manager in Investec's frontier markets team, is one of the investors looking to increase exposure to stocks again after reducing holdings in 2011.
"Tunisia has enormous potential to reform," Rohm said. "However [it] is in desperate need of foreign direct investment to drive economic growth and job creation."
Tunisia has yet to form a government, expected to happen in coming weeks, but political stability and steps towards reform make Tunisia worth a fresh look, said Jefferies' analyst Richard Segal, noting positive comments from ratings agency Fitch.
"Trends are likely to remain market friendly on balance for the next two to three months," Segal told clients. "Therefore, we'd be more likely to be positive than neutral about Tunisia”.
Tunisia signed a two year deal with the International Monetary Fund in 2013, agreeing to follow certain economic policies such as keeping its deficit under control, making the foreign exchange market more flexible and structural reforms.
The government has already cut fuel subsidies, imposed new taxes and let the dinar depreciate to re-build foreign currency reserves, but more reforms are needed.
Ratings agency Fitch points to Tunisia's banking sector representing a key structural weakness and ripe for an overhaul.
Furthermore, investors worry in particular about its current account deficit, especially as foreign direct investment, at 1.5 billion Tunisian dinar ($780 million) last year according to official data, remains well off pre-2011 levels.
Ratings agency Fitch estimates Tunisia's 2014 current account deficit at 8.3 per cent of the gross domestic product due to energy imports. This compares to 6.7 per cent in Morocco.
Some relief for the deficit could come from oil prices which have slid 60 per cent since June, said Florence Eid, chief executive officer of think tank Arabia Monitor. Yet that could equally weigh on foreign direct investment from oil exporting countries in the Gulf.
"Tunisia will benefit in terms of lower energy prices, but will not accelerate the pace of investment as much as it could have done," Eid added.
Robert Ruttmann from the investment office at Julius Baer is doubtful Tunisian shares can repeat last year's performance.
"Tunisian earnings will have to improve substantially this year in order to justify any further index price rises," he said, adding he was not recommending Tunisian stocks to clients.
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