Foreign friends: Investment from abroad holds firm

reverses in 2009 and 2010. These, in turn, had followed major gains in the years leading up to the global down-turn, with the net figure standing at just over JD300m ($422m) in 2008. “As a small market, we really bene-fitted from foreign investment funds targeting phos-phates, potash and others,” said Tarek Yaghmour, the vice-president and head of research at Capital Invest-ments. “These funds benefitted us, first by attracting money into the market due to strong buying, and sec-ond by giving others confidence in the ASE.”

Foreign ownership has long been concentrated in cer-tain areas, particularly mining and extraction, where the level reaches 63%, technology and communications (62%), and banking (60%). In 2012, however, foreign investors picked food and beverages as a new avenue for equity purchases, increasing their share from 44% in 2011 to 52%. Meanwhile, printing and packaging saw a decline in foreign ownership, from 36% to 24%.

GROWTH POTENTIAL: When it comes to future areas of expansion, some are also now looking to areas where foreign ownership has traditionally been low, but which may be set for a surge in growth. One such area is tourism. Of the 12 companies listed under the hotel and tourism sub-sector on the ASE, six are more than 30% foreign-owned, according to Capital Investments, yet overall foreign ownership of the sub-sector amounts to 26%. Meanwhile, tourism – and medical tourism in particular – has been repeatedly highlighted by the government as an area for major future development.

Likewise, in the real estate sector – where many see potential for growth – current foreign ownership by mcap is just 7%, even while foreign companies own more than 30% of nine of the sub-sector’s 35 listed com-panies. Here too, foreign property purchases may well be tied to tourism development, as the sector looks increasingly for overseas second-home and retirement buyers. While many of the opportunities that attract-ed foreign investors in the past – most of which arose out of the privatisation programme – have long gone, there may therefore still be major possibilities to come. While the Amman Stock Exchange (ASE) experienced some challenging times in 2012, one of the more remarkable successes the exchange recorded was in retaining its foreign investors – indeed, the share of mar-ket capitalisation (mcap) that is foreign-owned increased during the year. In many ways, this demonstrates the continuing appeal of the Jordanian market overseas, while also highlighting an important characteristic of many foreign players – that they are here to stay.

STAYING STABLE: This has been a great advantage for Jordan, with the market maintaining stability even in the face of recent regional and international uncertainties. The ASE has also not been plagued by the kind of hot money inflows and outflows that have dogged certain other emerging markets. Advancing this level of solid foreign participation, however, will likely require some new moves by the exchange, as competition for glob-al investment continues to tighten. There are plenty of major projects on the horizon that are likely to see for-eign investment increase though, such as the revived Red Sea-Dead Sea water project, future shale gas devel-opments, transit routes for Iraqi pipelines, renewable energy, medical tourism and the major expansion of Aqa-ba port (see Aqaba chapter). The capital market could benefit from all of these, as will the economy in gen-eral, lifting many boats – from blue chips to small caps – and with foreign participation key.

RISING LEVELS: In terms of mcap, the proportion of the ASE owned by foreigners went up in 2012, from 51.3% to 51.7% – a small increase, but under circum-stances of global risk aversion and the regional uncer-tainties arising from the Arab Spring and its aftermath, many saw this as a good performance. However, as of April 2013, this proportion had decreased to 51.2%.

Net investment by foreigners was positive, with JD323m ($454m) of stocks bought by overseas play-ers, versus JD285m ($401m) sold, leaving a net gain of JD38m ($53m). This was lower than in 2011, which recorded a net positive of JD79m ($111m), but contin-ued the net positive pattern that began that year, after reverses in 2009 and 2010. These, in turn, had followed major gains in the years leading up to the global down-turn, with the net figure standing at just over JD300m ($422m) in 2008. “As a small market, we really bene-fitted from foreign investment funds targeting phos-phates, potash and others,” said Tarek Yaghmour, the vice-president and head of research at Capital Invest-ments. “These funds benefitted us, first by attracting money into the market due to strong buying, and sec-ond by giving others confidence in the ASE.”

Foreign ownership has long been concentrated in cer-tain areas, particularly mining and extraction, where the level reaches 63%, technology and communications (62%), and banking (60%). In 2012, however, foreign investors picked food and beverages as a new avenue for equity purchases, increasing their share from 44% in 2011 to 52%. Meanwhile, printing and packaging saw a decline in foreign ownership, from 36% to 24%.

GROWTH POTENTIAL: When it comes to future areas of expansion, some are also now looking to areas where foreign ownership has traditionally been low, but which may be set for a surge in growth. One such area is tourism. Of the 12 companies listed under the hotel and tourism sub-sector on the ASE, six are more than 30% foreign-owned, according to Capital Investments, yet overall foreign ownership of the sub-sector amounts to 26%. Meanwhile, tourism – and medical tourism in particular – has been repeatedly highlighted by the government as an area for major future development.

Likewise, in the real estate sector – where many see potential for growth – current foreign ownership by mcap is just 7%, even while foreign companies own more than 30% of nine of the sub-sector’s 35 listed com-panies. Here too, foreign property purchases may well be tied to tourism development, as the sector looks increasingly for overseas second-home and retirement buyers. While many of the opportunities that attract-ed foreign investors in the past – most of which arose out of the privatisation programme – have long gone, there may therefore still be major possibilities to come.

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