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A True Frontier Market: the Palestine Securities Exchange




Last year, we met with a Palestinian official named Dr. Jihad al-Wazir, the governor of the Palestinian Monetary Authority. He explained to me his vision for financial modernization and transparency as a way forward for the West Bank, with investment providing greater opportunities for the territory. Although the specter of armed conflict – either with Israel or internally with Hamas – always looms over Palestine, they have actually made some remarkable economic strides.


This week, a group of Palestinian business leaders and investors traveled to London to promote the Palestine Securities Exchange, based in the cities of Nablus and Ramallah. Ahmad Aweidah, the PSE’s chief executive, pointed out the fact that “investors have achieved an average annual return of 17.5%” since 1997.

The PSE is moving towards floating itself as a publicly-traded company in late 2010 or 2011, according to the Financial Times, and its biggest Western investor is Blakeney Management, a small London-based firm very similar to Turan in its focus on emerging markets and illiquid assets, according to Aweidah.

The risks of investing in Palestine are obvious – security and corruption top the list, with the ability of listed companies to expand their production and sales severely limited in the event of conflict or Israeli blockades. The upshot is that like any ‘frontier market,’ opportunities to pick up underpriced securities will exist in the climate of uncertainty and inefficiency. The largest of the exchange’s 39 companies is PalTel, a local mobile provider – a classic emerging market infrastructure play, as many developing economies skip landlines altogether and head straight for mobile networks that cover more population faster.

If conditions stay relatively stable and Dr. al-Wazir is able to create a functioning system for central banking and capital markets, Palestine’s relatively educated population couldfuel an economic boom in a territory starved for opportunity.

Look to see the PSE’s investor roadshow repeated later this year in New York City.



Disclosure: no positions