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A dawning market

Damascus Securities Exchange opens its eyes and stretches its legs

by Executive Staff

The Damascus Securities Exchange (DSE) launched in March had been a long time coming, like a financial version of the play “Waiting for Godot.” Year after year, articles would emerge in the press — this magazine included — that the DSE was slated for launch by year’s end.

Back in June 2007, Executive paid a visit to the future site of the bourse in Birzeh in northeastern Damascus, then housing the Syrian Commission on Financial Markets and Securities. The Commission’s plain gray concrete building looked like any other non-descript government structure in a Damascene suburb: the ubiquitous Syrian flag draped over the main doorway, security guards milling around, and badly lit interiors.

The room on the ground floor that was to become the trading floor resembled a small theater or cinema, with 50 odd, dusty, red felt seats facing a curtained stage. Such a gloomy interior did not look like the ideal location for the country’s first bourse since the 1960s. But the temporary home of the bourse has had a makeover.

The exterior has been stone clad to resemble the checkered shirts favored by many bankers; an electronic ticker shows trades over the main entrance, and up-market cars are parked along the surrounding streets. But it is the interior that is starkly different from two years ago.

Greeted upon arrival by a be-suited young Syrian lady, she was ready to give a tour and explain what the bourse was all about. But she didn’t need to go into the details as twice a week, on the two days the DSE is open, the public is treated to a lecture on the workings of the stock market — how to trade, what buys and sells are, bidding prices, percentage change and so on.

Some 60 people were sat on one side of the viewing area of the bourse, a mixture of both genders from their mid-twenties upwards, while a dozen sat in more plush chairs nestled amid flat screen computer monitors on the other side — the VIP section.

As the spokesman gave his presentation, he repeatedly turned to point at the digital trading board that dominates the back wall. To the immediate right of it, there is the only indication — other than the title of the DSE — that one is in Syria: the national flag attached to the wall and a small camera next to it. Curiously, the portrait of President Bashar al-Assad had been removed since the official launch on March 10.

Where the dirty work is done

The actual trading section consists of 18 cubicles set on a raised platform separated from the ‘audience’ by a waist-high glass wall. Five traders were at work, tapping into their computers, and by mid-morning a mere three trades had been made.

But that didn’t deter the apparent interest by the public, listening attentively to the presentation and asking questions.

Such interest reflects not only how the bourse has been received locally and internationally — notable as the first stock exchange to open since the global financial crisis — but also the long route the DSE has taken to open.

Syria has played it slow and cool in introducing such an economic platform to a population that is generally poorly informed about free market capitalism. After all, millions were stung in Saudi Arabia when the kingdom’s fledgling bourse dropped in value a few years ago. It caused a great deal of consternation among a public that had ill-conceived notions about what a stock market truly entailed: they realized too late that stocks don’t always go up, and that an emerging bourse is not always the best place for one’s life savings.

Listed companies and companies that have acquired initial approval for listing in the market

Source: DSE

Companies that are expected to be listed in 2009

Source: DSE

Indeed, the DSE is only in phase two of its development — the launch and building up of interest and trading levels. Phase three will be a more mature stage, as more companies list and the bourse moves to a purpose built location at Emaar’s $500 million Eighth Gate real estate development on the edge of the Syrian capital, slated for completion in mid-2010.

There are currently eight companies listed on the DSE (five of which are banks), three have initial approval for listing, and a further nine are slated to list this year, mainly banks, insurance and telecom companies.

“We could reach double the number of companies by the year end. If we get 14 companies listed, it will be quite good,” said Bassel Hamwi, general manager of Bank Audi Syria and deputy chairman of the DSE.

“The DSE has risen fairly well, but we won’t reach a point where it mirrors the economy itself — that is some way off. Total capitalization is less than one percent of Syria’s [gross domestic product],” he said.

Trading levels are also low as the DSE has set a daily cap of 2 percent for shares to rise or fall, while they cannot be bought or re-sold on the same trading day.

“I think the cap should be temporarily raised to 5-10 percent to have some activity,” said Jihad Yazigi, editor of financial publication The Syria Report. “The number of shareholders is also very limited, not tens of thousands but only in the thousands.”

The DSE clearly has potential, with pent up demand by companies to access capital, family owned companies to list, and privatization being mulled by the government. A clear indicator of such potential was evidenced over the past month by brokerage firms scrambling for licenses as the government had set a limit of 19. Currently only five are active.

“There are 19 brokerage firms, which is more than the number of firms listed on the DSE,” said Yazigi. “But the DSE is very low, so it can only go up. It is very symbolic of the efforts to liberalize the economy over the years.”

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