IRAQ: RESILIENT MARKET
The sectarian violence that is engulfing Iraq has had one small, unexpectedly positive, spin-off: a resurgence of investor interest in the country, according to Iraq-focused fund managers.
The crisis worsened last week as Sunni militants battled for control of oil refineries in the north of the country and threatened to march on Baghdad.
But despite the conflict, Sanjay Motwani, who runs a $34m Iraq fund at Sansar Capital, an emerging markets fund house, said: "I have had enquiries from people asking if right now is a huge opportunity.
"The people interested are contrarian investors, and they tend to recognise that even when there is very bad news, the market tends to be resilient."
Iraq's stock exchange dropped 6 per cent last week, which Mr Motwani considered a positive sign.
"Long-term investors are taking advantage of the ridiculous bargains because of the valuations," he said. "That is why you are seeing the market be a lot more resilient than if this happened in another country."
A second Iraq-focused fund manager, who asked to remain anonymous, agreed, saying: "Our larger investors are looking at this as a potential buying opportunity. The volatility does not bother them too much."
He warned, however, that the initial market recovery is likely to be fleeting. "The Iraqi market still has pretty substantial downside," he said.
Sherif Salem, who runs the $21m Invest AD Iraq Opportunity fund, also said he had received "a lot of interest", particularly from wealthy individuals in Europe and Asia.
The political crisis has, however, stalled investor commitments. "A lot of people are interested in talking about Iraq but obviously what is going on now is not helping the investment case," he said.
Despite the conflict, Mr Salem remained positive about investment opportunities in Iraq, particularly in banking, telecoms and consumer goods.
He said: "Iraq is the usual frontier markets story, except I think this one has even higher growth potential, given it is coming from such a low base."
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