New Stock Exchange Launched Amid Global Downturn

The Syrian authorities are hoping that the country’s first-ever stock exchange will give a boost to the emerging private sector, although some experts say it could hardly have started up under more adverse market conditions.



The Damascus Securities Exchange, DSE, began trading on a limited scale at the end of January, as part of a pilot project designed to test out the computer systems. The three-week trial will also give the Egyptian-trained brokers and other staff an induction period, including opportunities to practice dealing with emergencies such as systems breakdowns.



The DSE is due to be officially inaugurated on March 9.



As Syria attempts to shift from a centralised socialist system to a social market economy, the authorities have introduced legal and regulatory reforms to get the financial sector into better shape. Private banking was legalised as long ago as 2001, and more recently private ownership rights were increased.



The stock exchange is the latest step in this process, and there are hopes it will stimulate investment in the private sector.



The way was paved for the DSE by a presidential decree issued in 2006, but it has been delayed repeatedly because of problems in acquiring the right technology. A report by Oxford Business group published last year said a United States economic embargo had hampered Syria’s attempts to purchase electronic trading systems.



The DSE, which is operating under the aegis of government, will trade only on Mondays and Thursdays, and will be subject to restrictions designed to restrict speculative trading and abrupt changes in share prices.



“The Damascus stock exchange will not be open to gambling or risk-taking,” said Ratib al-Shalah, chairman of the DSE’s board, in remarks quoted by the SANA news agency. “Shares can only be traded by those who want to invest money, not for speculation.”



The DSE’s deputy chairman Saqr Aslan has made it clear that the value of shares in any company listed on the exchange will not be allowed to rise by more than two per cent in the course of a day’s trading. Nor can shares be bought and then resold the same day.



The pilot phase involves just five companies, most of them local banks with foreign capital. The DSE says that about 30 companies, half of them in the banking and insurance sectors, are currently eligible to take part once the exchange is fully up and running.



For a company to qualify, it has to be at least one year old, have a minimum capital of 100 million Syrian liras and at least 100 shareholders.



The DSE’s Aslan told the Syria News website that he expected 15 companies to be listed, with total capital of some 28 billion liras.



The exchange is currently based in temporary premises, but will later move to an upscale neighbourhood in the suburbs of Damascus.



Some analysts fear that the financial turbulence affecting world markets, and stock exchanges in the Gulf, in particular, does not bode well for the DSE.



“Unfortunately, the stock exchange in Syria is opening at a time of unfavourable economic conditions,” said Abid Fadhila, professor of economics at Damascus University, predicting that the global recession would slow trading on the DSE.



Mohammad Samman, a 50 year-old businessman in Damascus, said he was concerned that “the bankruptcies that have hit many small investors in other Arab countries like Dubai make many here fearful of investing in the stock market, especially since there’s a lack of expertise in this sector in Syria”.



DSE chairman Shalah insists the stock exchange will not be affected by trouble in the Gulf markets as it has not been exposed to risk through investments in foreign funds.



Others complain that the DSE will exist mainly to benefit foreign investors rather than local people with limited amounts to spend on shares.



“Most Syrians can’t afford to pay their basic daily costs, so how can they buy shares?” asked Mohammad Suleiman, a 30-year-old who works for the finance ministry.