ISX Year-end Jinx Lifted?
The ISX historically has tended to go down in the second half of the year. Last November, I argued that this may be due to the timing of capital increases. (See this post.) If this is the case, the recently announced new rules on share suspensions mean that the market will no longer follow its old seasonal pattern.
In the past, companies would be entirely suspended from trading until rights and bonus shares were deposited in the Iraq Depository Center. This usually took many months. As capital increases generally take place in the first half (around the time that financials for the previous year become available), investors had to wait until the second half to sell. The year-end jinx, I argued, was simply the result of delayed portfolio rebalancing.
Under the new rules, original shares resume trading almost immediately after capital increases. This means that portfolios can be rebalanced right away. While it may still take months for new shares to start trading, investors can now sell some of their old shares to reduce their positions.
As a result, it seems to me that there is no longer any reason for Iraqi shares to decline into the year end. The bad news, of course, is that the year-end jinx hasn’t really been lifted. It’s just going to happen earlier in the year.