Jordan Capital Markets

Interview with Jalil Tarif, CEO of Amman Stock Exchange

According to the Economist there are new nascent bubbles being formed such as government bonds in developed countries, and emerging markets which have become creditors to the rest of the developed countries and their economies get valued at higher ratings than developed markets. There is a dollar peg in China. Many people look towards gold and real estate in developed markets. With all these temptations, where should a smart investor go to protect his funds in these turbulent times?

Investors should look into opportunities not only in the mature markets but also in emerging markets. When we look at emerging markets, like Jordan, I think we have very good opportunities for investors. Despite the turbulence, not only due the  financial crisis but also due to political issues there will always be opportunities in the Middle East. But in Jordan, we have no restriction on ownership and we have good potential in many sectors that need financing. Smart investor should seize the opportunities in emerging markets to realize high returns.

What additional services and products should be offered on the Jordan stock exchange in order to increase the depth and sophistication?

We have built a very sound capital market in Jordan in terms of regulations, technology and infrastructure. We have government regulator that oversee the capital market and regulate it in order to achieve its objectives in protecting investors and developing the market for the sake of having fairness, transparency, and efficiency.

Measures that allow for foreign investors to invest freely in the market without any restrictions will definitely attract more investment. The Jordanian capital market is well regulated and promising market . Foreign ownership at the Amman Stock Exchange reached (49%) of total market capitalization.

How do you forecast the economic activity on the Amman stock exchange? Do you see more of a decrease for the outlook or do you see stabilization?

The current market capitalization amounted to 22 billion JD. That represents about 137% of GDP, which is considered high compared with international standards. But despite the decline in 2008 and 2009, if we compare ourselves with the neighboring countries, I think we are still doing better than many of the exchanges in the region.

Which economic sector, in your opinion, will be a winner and a loser in 2010 and 2011?

We have the service sector which is an important sector in the economy; the tourism sector is growing well this year. As for the declining sectors, I think the mining sector has been affected by the global financial crisis but I am optimistic about next year. I’m hopeful and optimistic that next year will be a start of picking up in many sectors.

What has been the sentiment so far? Is it improving or is there stagnation?

I think the market is affected by what is going on, globally and locally. The government introduced reforms in the fiscal policy , aiming at curbing the budget deficit which will affect the overall government expenditures and the budget deficit. We expect to have 3 or 4% growth in the GDP this year.

With the elections next November, the government will take care of the new reform measures introduced and will start a new year with a new parliament. So hopefully 2011 will be a year where the economy will really benefit from the restructuring that took place this year. All the laws and regulations as well as austerity measures and the government reform policies should really start paying something to the economy and enhance sustainability in terms of growth next year.

Would you like to see more government intervention or a free market?

I think the main lesson that we learned from the crisis is that a market should work according to its own mechanism. We should not interfere in the market forces and supply and demand forces. What we can enhance is  the corporate governance and transparency. Any intervention in the market, if it’s aimed at affecting the prices of securities, will not last long.

What should be done to stimulate growth in the market?

We should look at enhancing growth in the economy. Interest rates and liquidity for example, are important factors. Credit facility provided to the financial sector as well as to other sectors will really stimulate the economy. All this will affect confidence and the stock exchange.

What should the Jordanian government do? What policies should they implement?

Reduce budget deficit /GDP ratio to a healthy level. Credit facilities of the banking sector should be encouraged to provide more credit facilities to the economic sectors as well as to investors at the stock exchange. Inflation, interest rates , should be monitored to enhance sustainable  growth . 

How would you define the strategy of Amman Stock Exchange over the next 4 years and what is the agenda?

The Amman Stock Exchange is currently a full member of the Federation of Stock Exchanges.
We are making a huge effort to upgrade our infrastructure, and we have introduced a new trading system provided by the NYSE. This system is already integrated with the securities depository center database so all trades go through the database to make sure that securities are available prior to the execution of orders.

This system is also integrated with a surveillance systems provided by the Jordanian securities commission. Last month we introduced E-Trade for the first time. E-Trade will definitely help to enhance accessibility to the market, regardless of the geographic location of the investors. We started with four companies and we are in the process of licensing new companies to provide the services. We believe that having easy access to the market will attract more investors, both locally and internationally.

With all these new systems in place, how do you intend to spread the word to the world that you are now accessible to investors?

Last month we introduced a new website that attracts more than 200 million hits per month from both Jordan and outside. We have road shows that we provide every year. This year we had one in London along with ten companies listed at the exchange, so we met directly with the portfolio managers and international investors interested in the market. We promote E-Trade by announcing it through the media and on our website.

You are sort of an ambassador to the financial sector in Jordan, what would be your final message about this to our international audience?

Investing in Jordan and in the region is something special. We have very good opportunities so I think investors should consider investing in Jordan seriously.