VZCZCXRO0612
RR RUEHDE RUEHDIR
DE RUEHAM #0504/01 0490645
ZNR UUUUU ZZH
R 180645Z FEB 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 1810
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEHEG/AMEMBASSY CAIRO 3531
RUEHLB/AMEMBASSY BEIRUT 2789
RUEHDM/AMEMBASSY DAMASCUS 3794
RUEHTV/AMEMBASSY TEL AVIV 1025
RUEHJM/AMCONSUL JERUSALEM 4864
RUEHFR/AMEMBASSY PARIS 1499
RUEHLO/AMEMBASSY LONDON 1205

UNCLAS SECTION 01 OF 03 AMMAN 000504 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA AND EEB 
STATE PLEASE PASS TO OPIC AND SEC 
TREASURY FOR SETH BLEIWEIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV JO
SUBJECT: GROWING NUMBERS OF JORDANIANS INVEST IN STOCK MARKET 
DESPITE RECENT VOLATILTY 
 
REFS:  A) AMMAN 78 
        B) 05 AMMAN 2776 
 
¶1. (U) SUMMARY:  Approximately 15 percent of Jordanians own shares 
in companies traded on the Amman Stock Exchange.  The exchange saw 
rapid growth in 2003 to 2005, followed by a steep decline in 2006 
and quick growth in 2007.  245 companies are listed on the exchange, 
which now has 65 brokerage firms.  Over time, non-Jordanians have 
increasingly invested in the exchange and now hold 49 percent of 
shares, a figure officials would like to see grow.  The exchange is 
working to launch online trading and to offer new financial 
products.  Private equity investments are also growing in Jordan. 
END SUMMARY. 
 
¶2. (U) 245 companies are listed on the Amman Stock Exchange, 
including 18 companies added in 2007.  One company alone, Arab Bank, 
accounts for about 40 percent of the exchange's market 
capitalization.  The top 30 companies on the exchange, many of which 
are in the financial services sector, account for 83 percent of 
total market capitalization.  There are 65 brokers in Jordan, up 
from 61 in 2006.  Jalil Tarif, CEO of the Amman Stock Exchange 
(ASE), said that initial public offerings (IPOs) occur regularly and 
have been worth about USD 10 billion in the last four years across 
several sectors, including the recent Royal Jordanian Airlines IPO 
(ref A). 
 
Stock Ownership through Boom and Bust Periods 
--------------------------------------------- 
 
¶3. (U) The number of investors in the ASE has grown quickly over the 
last five years.  Talal Touqan, Head of Research and Financial 
Analysis at Ahli Investment Banking, said that there are 900,000 
Jordanian stock accounts, but commented that individuals may have 
more than one account.  Tarif said that the number of accounts has 
doubled in the last five years, and he estimates that 15 percent of 
the population participates in the stock market.  Tarif also 
expected steady growth in the number of investors in the future. 
 
¶4. (SBU) Several Post financial contacts consider stock ownership 
levels in Jordan to be moderate, and believe they fell after 
Jordan's stock market declined in 2006.  Nashat Masri, the founder 
of a private equity investment firm, said that the ASE has 
experienced both boom and bust cycles over the past five years, with 
growth over 50 percent in 2003, 2004, and 2005, followed by a 33 
percent fall in 2006 and 36 percent growth in 2007 (ref B).  ASE's 
index value peaked at 8,192 in 2005.  When its value fell in 2006, 
ASE's daily trading volumes declined by one-third and have remained 
below the peak-trading mark ever since.  A January 2008 report by 
Capital Investments reported that the ASE index ended 2007 at 7,519, 
close to its highest level in 20 months but still below its 2005 
peak. 
 
¶5. (SBU) Many Jordanians entered the stock market during the height 
of the boom.  Dr. Abderrazaq Bani Hani, Commissioner of the Jordan 
Securities Commission (JSC), estimated that 200,000 investors, 
nearly all Jordanian, entered the market in the 2004-2005 boom 
period.  The bust in 2006 hurt the middle class most, because they 
entered late and then left during the bust.  Kholoud Saqqaf, Acting 
Executive Manager of the Banking Supervision Department at the 
Central Bank of Jordan (CBJ), said she grew nervous about the ASE 
when Jordanian women began selling jewelry to buy stock.  All of 
Post's contacts had similar stories about taxi drivers and shoeshine 
boys entering the stock market.  Masri believes that many from the 
lower and middle classes have left the stock market.  Sahel Annabi, 
founder of a financial advisory firm and of Jordan's first personal 
finance magazine, said that after the bust, Jordanians who sold 
stocks typically reinvested the money in real estate which is 
perceived locally as less risky. 
 
¶6. (SBU) The ASE index has most recently hovered around at 7,750. 
Abeer Ziadeh, a research analyst at Capital Investments, said that 
in recent weeks the ASE has been volatile because of the U.S. 
sub-prime housing crisis.  She said investors are nervous, and 
wondering if they should get out while they still can.  Tarif 
countered that the corrections that have occurred on the ASE were 
normal and reasonable, especially since some companies had their 
valuations grow much faster than their businesses did. 
 
AMMAN 00000504  002 OF 003 
 
 
 
International Ownership of Jordanian Stocks 
------------------------------------------- 
 
¶7. (U) Ownership of stocks traded on the ASE today is 51 percent 
Jordanian, 36 percent non-Jordanian Arab, and 13 percent from other 
countries, including three percent from American shareholders.  In 
2003, Jordanians owned 66 percent of shares.  Both Bani Hani and 
Tarif considered the growing international interest in ASE as a 
testament to the quality of the companies listed on the ASE and the 
potential for the economy.  Bani Hani said that in the fall, he and 
several other executives from 10 Jordanian companies participated in 
a road show in New York and London to promote investing in Jordan. 
Both Bani Hani and Tarif described the visit as a success and saw 
promising interest in investing in Jordan, particularly in Jordan's 
"blue-chip" stocks including Jordan Telecom, Arab Bank, and Jordan 
Phosphate.  Bani Hani said that JSC is committed to ensuring that 
Jordan has "American standards" for securities disclosure and 
reporting. 
 
Stock Exchange Improvements and Education 
----------------------------------------- 
 
¶8. (U) In 2007, the ASE notched several achievements, including 
signing a cooperation agreement with the London Stock Exchange and 
being accepted into the World Federation of Exchanges.  Three large 
initiatives are currently underway: online trading, adding 
additional financial tools, and building expansion.  Tarif said that 
online trading, which is being implemented with USAID support, will 
be available at the first brokerage houses in a few months with 
additional brokerage houses added throughout the year.  He believes 
that online trading will benefit small investors most by lowering 
the barriers to entry.  Tarif also described a possible USAID 
project at ASE to develop new financial products, including exchange 
traded funds (ETF).  NOTE: An ETF is a pool fund invested with a 
stated investment objective, for example, a tracker fund for the 
energy sector or an index fund that tracks an exchange's index.  END 
NOTE.  He said that ETFs should also benefit small investors.  Other 
potential projects will consider derivative products for advanced 
investors.  ASE, together with the JSC, is also constructing a new 
financial center scheduled to be completed in 2009. 
 
¶9. (U) On February 14, Dow Jones Indexes, a unit of Dow Jones and 
Company, and the ASE launched the "Dow Jones ASE 100 Index."  The 
new index tracks the performance of the 100 largest stocks listed on 
the ASE.  A press release and local dailies reported that this 
product is expected to increase the transparency, visibility and 
accessibility of the ASE.  Tarif is quoted in the press release that 
while the ASE has had its own index since 1980, this Dow Jones Index 
will enhance ASE's exposure to foreign investors. 
 
¶10. (U) Bani Hani noted that the JSC is focused on investor 
education and on creating a culture of investment.  Ziadeh explained 
that when people entered the stock market for the first time in 2004 
and 2005, they were not well-informed.  Investors were looking for 
quick money.  Ziadeh speculated that current investors are more 
interested in long-term investments.  Bani Hani said that JSC 
sponsors programs for high school students, college students, 
faculty, and JSC employees to improve financial acumen.  Tarif said 
that ASE also hosts events to increase the public's general 
understanding, including open houses at the investors' gallery. 
 
¶11. (U) In other efforts to further develop knowledge about the 
markets, the Department of Treasury's (DOT) Office of Technical 
Assistance (OTA) will provide training February 20-21 to the JSC on 
anti-money laundering compliance within the securities sector in 
light of Jordan's Anti Money Laundering Law passed in July 2007. 
Approximately 30 JSC employees of all levels are expected to attend, 
as is the director of Jordan's newly-established Financial 
Intelligence Unit (FIU).  This training complements DOT AML efforts 
already underway in Jordan's financial sector.  Following this 
training, DOT-OTA will assist the JSC in developing 
train-the-trainer programs for use by the companies in the 
securities industry. 
 
Private Equity and Real Estate Development 
------------------------------------------ 
 
AMMAN 00000504  003 OF 003 
 
 
 
¶12. (SBU) Masri also described the significant flow of capital into 
Jordan.  His firm manages the $50 million Jordan Fund, and is also 
launching a second private equity fund, which will also be 
Jordan-centric.  $20 million of the Jordan Fund came from the GoJ's 
Jordan Telecom sale.  While investment in Jordan - particularly from 
the Gulf - has grown, Masri said that in 2000 when the fund was 
founded, there was very little capital in Jordan and the fund needed 
government assistance to launch.  An Oxford Business Group report 
estimated that $307 million in private equity was invested in Jordan 
between 1998 and 2006. 
 
¶13. (SBU) During a February 10-12 visit to Jordan, Overseas Private 
Investment Corporation (OPIC) President and CEO Robert Mosbacher 
described some of OPIC's investments in Jordan through five private 
equity funds established in 2007 - four cross-sectoral funds and one 
housing fund.  NOTE: OPIC typically contributes about one-third of 
the fund's total capital in the form of senior secured debt as a way 
to address the lack of sufficient equity in emerging markets. 
Private fund managers raise the remainder of the funds' equity 
capital to be directly invested in private companies.  END NOTE. 
Mosbacher noted that fundraising for the five Jordan investment 
funds has been slower than hoped, primarily due to a lack of 
experienced and known fund managers, as well as a lack of experience 
with private equity funds.  Mosbacher told his Jordanian 
interlocutors he believes that these obstacles will be overcome as 
private equity fund managers gain a reputation and track record in 
Jordan. 
 
¶14. (SBU) Tarif expressed regret that none of the largest real 
estate development projects in Aqaba or Amman are publicly traded 
companies.  He would like to see these developers using IPOs as a 
way to raise investment funds and to allow all Jordanian to take 
part in economic growth.  Tarif said that stock ownership is often 
the easiest way for small investors to participate and regretted 
their exclusion. 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
RUBINSTEIN