According to Bloomberg.com, Palestine has just been granted Frontier Market status by the FTSE. The article clarifies, “While none of the 49 publicly traded companies have been granted the same status, the move is a precondition to consider them for inclusion.”
No, this is not a market for retail investors yet, but it certainly is a step in the right direction. By being considered as a frontier market, the big benefit is that the country will gain more exposure, which is always a good thing.
As an investor, I am always looking for new and exciting markets, and Palestine could be one hopefully in the near future. In my opinion, what is holding back the economy and foreign investment is the unstable political situation in that country. On October 8, a decade later than the last elections, the Palestine electorate will vote in municipal elections.
The current president, Mahmoud Abbas, whose term was up in 2009, has been governing by decree as he does not want to chance another upset win by Hamas. So the municipal elections will be nail-biting time in that country, and injects a huge amount of political risk into the equation.
If the governing Fatah party wins these elections, then hopefully there will be a sense of stability which can be built upon. However, if the converse happens and Hamas wins the elections—and by the way, in a recent poll if the presidential elections were held today, Hamas would win—then all bets are off and the hard fought victory to attain frontier status will be for naught.
So, although I would like to eventually invest in that country, the future lies in the hands of the voter. The Nablus stock exchange, which began operations in 1997, has 49 companies trading, and the returns of the benchmark index (PASISI:IND) have shown it to be one of the better ones of all exchanges in that part of the world.
I am sure that Palestinians would like to take part in investing in a dynamic economy, and so would I; therefore I hope that the October results will be the dawn of an economic revival in Palestine. I hope that my highlighting their new status will help in some small way.
Peter Kohli is the CEO of emerging market specialist DMS Funds.