The mobile phone has weaved itself into the social fabric of Iraq,” says an Iraqi businessman. “The country is still not stable, so it’s a way of communicating with relatives or friends. People in places like Baghdad still don’t go out much at night.”

With incidents like the suicide bomb attack which left at least 22 dead in Taji, north of Baghdad, on 4 February, you can’t blame Iraqis for wanting to stay at home and talk on the phone. But as well as changing the social dynamic of the country, could a mobile operator also now help to change the country’s financial and business life too? There is some reason to think so, after the successful listing of shares in mobile operator Asiacell on the Iraq Stock Exchange (ISX) in early February.

The company sold $1.3bn worth of shares, equivalent to 25% of its equity, in what was the largest initial public offering (IPO) ever seen in Iraq. Trading in the shares started on 4 February and rose immediately. They were up 10% on the first day, the maximum allowed under ISX rules. Before the listing, the ISX could almost have served as the definition of a financial backwater. Trading volumes were slim and the 84 listed companies were generally ignored by anyone who wasn’t Iraqi and most who were. In December, for example, just $88m worth of shares were traded on the ISX, with 15,000 transactions in which 74bn shares changed hands. Even the much-maligned Nasdaq Dubai market, which is home to just seven companies, managed $150m worth of trades that month.

It wasn’t some sort of end-of-year lull on the ISX either. The previous two months had seen even fewer transactions. All that changed with Asiacell’s entry to the market. Now, if local stock brokers are to be believed, the company’s presence should both encourage more large companies to list their shares and also, perhaps more importantly, attract more international capital to the market.

“Having large companies on the stock market will help us to get the large mutual funds and large sovereign wealth funds into Iraq,” says Shwan Ibrahim Taha, chairman of Rabee Securities, which was the sole distributor and selling agent for the IPO. “We’re hoping it’s going to raise the liquidity on the market. Once it raises the liquidity it will allow the stock market itself to do more things and it will allow us to do more things.”

Faruk Rasool, managing director of Asiacell, seemed to take a similar view when commenting after the IPO had concluded. “This was a milestone event for us at Asiacell as well as being a transformative share offering for the Iraqi stock market,” he said. “Demand for Asiacell shares exceeded our expectations as investors from across the country participated in this offering. We’ve also seen strong demand from investors outside of Iraq from institutions from the US, Europe and the Middle East.”

In total, around 60% of the shares are thought to have been sold to international buyers. GCC investors were most prominent among them, including Qatar Telecom, which used the IPO to increase its controlling stake in Asiacell from 54% per cent to 64%.

The demand from beyond Iraq’s borders is important for the ISX and Iraqi businesses more generally, according to Hasan Abdul-Karim, chief executive officer and chairman of the local Aljazera Brokerage Company.

“The IPO brought in more international investors to invest in securities on the ISX, thus transforming the stock market into an international market,” he says. “It can be seen as a vote of confidence in the great potential for growth that will be witnessed in other sectors of the Iraqi economy.”

If this is indeed the start of greater international interest in the ISX it will be an important sign of how Iraq is slowly getting back on its feet. But there are many reasons to be cautious, not least the troubled history of the bourse itself, and progress is likely to be slower than many in Baghdad would wish.

The stock market in Iraq dates back to 1991, when the Baghdad Stock Exchange was set up. The US-led invasion in March 2003 saw the bourse closed and the following year it was permanently replaced by the ISX. When trading began on 24 June that year a basic ‘cry out’ system was used. It was only in April 2009 that electronic trading began.

International investors have been allowed to buy shares on the market since 2007 but it is not a right that many have chosen to exercise. Foreigners accounted for just 6.1% of trading volumes in 2012, according to Rabee Securities.

To date, banking has been the dominant sector on the ISX. There are 21 banks listed on the market, of which the largest are Kurdistan International Bank, North Bank and United Bank. In total, the banks accounted for 76% of all trading volumes in 2012 and they represented a similar proportion of the total market capitalisation of the ISX. The main sectors that the other listed companies are active in include industry, agriculture, hotels and tourism, and services, but all are tiny in comparison.

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