Syria’s Bourse – The Launch & Recommendations for Enhanced Liquidity

BY Ehsani2 (who works for a global financial institution in the area of bonds and derivatives)
For Syria Comment, March 26, 2009

Syria launched its stock exchange last week after years of delays in the latest step to liberalize the country’s largely state-controlled economy. The first step toward creating a legal framework for the exchange was taken in June 2005 with the promulgation of law No. 22 following the Presidential order to establish the “Syrian Commission of Financial Markets and Securities.” The second step was made on September 2006 with the announcement of Decree No. 55, known as the “Damascus Securities Exchange Law.” In July 2008, Decree No 36 amended previous laws to facilitate limited liability companies and local banks in offering general financial services.

Between June 2008 and January 2009, the DSE formalized and announced a number of regulatory resolutions covering items such as the code of conduct, market fees, and listing and trading rules.

The delay in the DSE launch can be blamed in part to the U.S. economic sanctions imposed on Syria which bedeviled efforts by officials to secure the computer system to run the exchange. Most platforms use U.S. technology which is proscribed by the US government. The Syrian government must also bear some blame for the delay, however. Not until the summer of 2008 was the legal framework established to support the exchange.

While delays were frustrating to some, most Syrians have grown accustomed to the slow and awkward crab walk that characterizes their government’s approach to policy formulation. Launching a securities exchange has required a revolution in economic thinking. For bureaucrats brought up within the strictures of Syria’s centrally planned economy, opening a securities exchange is an act of self-reinvention. The new laws and regulations have had to be tailored to work within a largely outdated legal and regulatory system. Even so, the revolution is not complete as the directors of the exchange insist that it will promote investment and not speculation.

The Launch:

On the first day of trading, March 10, 2009, only six companies were listed and only one traded. The total volume traded was 15 shares at an average price of SYP 1050 per share for a total value of SYP 15,750 or USD 342.

On the second day of trading, March 16, again, only one company traded (same company). The total volume traded this time was 25 shares in 2 trades at an average price of SYP 950 for a total value of SYP 23,750 or USD 516.

On the third day of trading, March 19, the shares of two more companies traded. A total of 5 trades took place. The volume traded grew to 1407 shares with a total market value of SYP 476,139 or USD 10,351.

On March 23, the volume of shares traded dropped back to only 2. The number of shares traded also dropped back to 800 shares while the value amounted to SYP 159,000 or USD 3457.

On March 26, the fifth day of trading, the number of shares traded was 129 shares for a total value of SYP 29,250 or USD 636.

Bank Audi Indices:

On March 17th, Bank Audi Syria announced that it would create its own “Audi Indices for DSE”. The various indices would help market participants track the activity of the market in terms of size, prices and trading volumes.

According to the bank and by the close of business on March 23rd, the market capitalization of all six listed companies was at SYP 18,588,750,000 or USD 404 million.

Why the lack of market volume?

While one can take comfort from the fact that the market is finally up and running, it is clear that the trading volumes are extremely disappointing.

There are several reasons for this severe lack of liquidity. While there are between 7500 and 10,000 shareholders who can potentially sell their shares to willing new buyers, there are reportedly less than 100 accounts open to date. In order to trade on the DSE, an individual has to open an account at one of the five approved financial brokers.

The other reason for the lack of liquidity concerns two particular aspects of the trading rules of the DSE as announced on January 7th of 2009. Section 24 of rule No 231 (trading rules) stipulates that a broker cannot sell a security on the same day of purchase. Section 25 of the same rule stipulates that the price change of a security one any one day cannot exceed a certain percentage both on the way up as well as down. While this percentage was not fixed by the ruling itself, DSE has announced that this percentage is currently pegged at 2%.

Personal observations:

The main government agency in charge of regulating the DSE is the Syrian Commission on Financial markets & securities. The Commission’s main stated mission is “to establish a fair market with a high standard of transparency, efficiency and depth”.

In its zeal to protect investors, the commission seems to have concluded that both sections 24 and 25 above are an essential part of its attempt to protect against volatile movements in daily security prices.

While this is understandable, the side effect of these measures has been a severe lack of liquidity and a lack of market depth that is supposedly part of the commission’s mission.

For the DSE to enjoy higher trading volumes and liquidity, the commission must revise its 2% daily price movement limit by raising it to 10.0% and it must also allow investors to buy and sell on the same day. The notion that waiting one day to sell a security turns a “trader” into an “investor” is not credible.

On March 23rd, Nadim Issa of Bloomberg News reported how the bourse struggled to attract volume as investors shun transactions because of the 2% limit on share movement. It was argued that this limit is impeding trading as the high volume of buy orders meant that prices had to move beyond the 2% limit to draw the sellers who refused to sell their shares 2% higher than the previous day’s close.

“There were a lot of buy orders but not enough sell orders on the other five companies,” said Omar Ghraoui, chief operating officer at Damascus-based Bemo Saudi Fransi Finance SA, the brokerage unit of Banque Bemo Saudi Fransi SA. The fluctuation limit is impeding trading and the brokerages are hoping the bourse will change the regulation, he added…. “We had many shareholders from Banque Bemo who were willing to buy Bemo’s shares but no one wanted to sell,” Ghraoui said.

The reason that many want to buy but none will sell is the 2% limit. Everyone believes that the Bemo shares are worth more than yesterday’s closing price plus 2% so they hold on to it. Let us suppose that new information causes the stock owner to believe that his stock is worth 10% more than yesterday’s closing price, he will refuse to sell until the market advances by 10%. This would take four trading days if it rises by 2% each day. But if no one is willing to sell stock, the market will not register a trade and the stock will become frozen at its low price. Broker’s will have to engineer a price rise by selling a single stock to a friend in an arranged transaction in order to get the market to move. In theory the market will constantly be running after a “true” price but rarely reaching it because “speculation” is prohibited. Markets are speculative by nature. Forbidding a price movement greater than 2% will lead to a frozen market, as we have seen happen in the first week of trading. Fortunately this problem is easy to solve by lifting the fluctuation limit.

The 2% daily price limit means that a stock worth close to USD 20.0 cannot go up or down by more than 50 cents a day. Since brokerage is set by the DSE at a range of 0.0034-0.0054 of market price, one expects to pay around 8 cents in brokerage alone. The market cannot possibly function with such a constraint if for no other reason than that the six brokerage companies will struggle to stay in business for long given the exceedingly low trading volumes. Also, there is no tax on profits made in the market.

Of the six companies that decided to list on the DSE, four are banking institutions. The other two are in the fields of transportation (Hama based) and publishing (Damascus based).

The latest financial disclosures of these companies will be announced in April. Based on preliminary data, the six institutions seem to have earned a combined after tax profit total of close to USD 37 million. The four banks make up nearly 96% of this total. Both the publishing and transportation companies combined seem to have earned less than $2.5 million. Given that the six companies have a market capitalization of $404 million, the current price to earnings ratio for the total market is near 11.20. This is attractive.

A number of the banks that dominate the market capitalization are enjoying healthy growth in earnings. In order to ascertain whether the current share prices are attractive one needs to calculate a forward price earnings ratio. Given the trajectory of the earnings, it is clear that on a forward basis, the price multiple is well below the 11.3 level. Were profits to rise by 20%, the forward P/E ratio drops to around 9.3 at the current share prices. The market is rather under priced and presents a buying opportunity.

While it is difficult to know the precise order book to ascertain the number of buyers and sellers at these prices, it is safe to assume that there are many more buyers than sellers. The 2% price limit has brought the market to a standstill.

Addendum: It is worth noting the volume of other regional stock markets:

  • Lebanon trades around 100,000 shares a day
  • Egypt between 50 and 100 million
  • Qatar’s average is 10 million
  • Jordan = 30 million.
  • Saudi and UAE = 300 million each
  • GCC Region – the top 200 companies trade between 500 million and one billion shares
  • Iran = 50 million
  • Israel = 150 million
  • The U.S. Trades an average of 1.5 billion a day in the S&P 500 and another 800 million on Nasdaq


The DSE and its regulators must take several urgent steps to improve market liquidity and encourage more public listings. The daily price limit of 2% must be increased immediately. Buying and selling on the same day must also be allowed. The DSE board must be given more authority to make recommendations and make changes as market conditions warrant. Large family owned businesses have yet to list on the exchange, which is a considerable weakness, given that most Syrian businesses are family owned. A committee should be formed to look for ways to accelerate this process. Tax laws are likely to blame for the low participation of this sector. Finally, procedures for opening accounts and encouraging public participation must be streamlined. Something is not working if less than 100 accounts have been opened to date.

addendum: See this NYTImes article by Robert Worth on the Stock Market – Syria Finds Right Ingredients to Start a Stock Market From Scratch

Aleppo Souq by Ketan Gajria 2009. Times are changing

Aleppo Souq by Ketan Gajria 2009. Times are changing (Click to enlarge)

Comments (112)

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101. jad said:

Mr. Shai
Arabic mentality hasn’t change much since its early tribal days; Syrians in general appreciate honesty, courage and generosity, or at least they like to think they do.
The first step in my opinion should be an honest public apology statement from the Israeli to all and everyone under their occupation and an honest promise to go straight into a meaningful peace process not into 100 years of empty and endless negotiations.
Doing that is the first and most important step any Israeli PM can do to go forward, otherwise it’s like an alcoholic man refusing to admit his addiction and he keeps fighting and beating his wife day and night.
This step won’t happen with your right gov. they doesn’t have ‘IT’.
Have a great day Mr. Shai the honest 🙂
P.S. Your honesty get you most of the Syrians support and admiration, can you imagine how much admiration any HONEST Israeli PM might get by just doing what you are doing, we all here jumped in to support you whenever we feel that someone is attacking you…this is a small example of what I meant.

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March 31st, 2009, 7:20 am


102. Chris said:

It sounds like some on this blog are critical of the fact that Israel has built roads for its people in the West Bank. How long do you think an Israeli, or an American jew for that matter, would survive on roads that Palestinians use? I can imagine the headline now. The point is, barring Palestinians from these roads serves to protect Israelis, and anyone in an Israeli car, from attacks by Palestinian terrorists. And that, protecting its citizenry, should be the first priority of any state.

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March 31st, 2009, 1:24 pm


103. Akbar Palace said:


They would last about 5 seconds.

Uh, yes Chris, security is a “small” concern Shulamit Aloni and others like her don’t seem to comment on. The people I stayed with in Efrat almost got killed by a terrorist bullet. The car in front of them wasn’t so lucky.

The Oslo Accords stipulate that not only are Palestinians (governed by the PA) prohibited from driving on Israeli roads (unless they get permission), but equally, Israelis are prohibited from using Palestinian (PA) roads.

This law is strictly enforced. For example Israelis are PROHIBITED from entering Bethlehem. This means Jewish, Christian, and Moslem Israelis. I’m sure special accomodation is made if a request is made to the government authorities in either direction. As an American, I am allowed to enter Bethlehem if I show my American passport.

But please remember, the issue isn’t “international” (between Palestine and Israel), the issue is Israeli. All Israelis can use Israeli roads no matter which religion, color, or political persuasion. Period.

Much of what you see on the internet are complaints that “Palestinians” (under PA rule) can’t enter Israel or use Israeli roads. Hence the wild claims of “Apartheid”. Of course, Israelis are prohibited from entering Palestine, but that’s OK.

Anyway, once a peace agreement is signed, perhaps one day, the borders between Palestine and Israel will be open like they are between the US and Mexico and Canada (which, still, employs evil checkpoints at the border).

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March 31st, 2009, 1:48 pm


104. Nour said:


What’s striking in your comment is how you brush aside the fact that these settlements are illegal and illegitimate. They are built on PALESTINIAN land and the roads are made for JEWS only. Yes JEWS, not “Israelis”, because it is effectively used by only Jews regardless of the argument over semantics. These settlements are inhabited strictly by Jews. There are no non-Jewish “Israelis” living in any of these settlements on the West Bank. So what you are saying is that the Jewish state of “Israel” has the right to build settlements on someone else’s land for Jews only and then has the right to build roads strictly for the use of these settlers in order to protect them from the natives who may not like the fact that they are settling their lands.

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March 31st, 2009, 2:29 pm


105. Nour said:


You seem to forget that the “Israelis” are the settlers and the occupiers, not the other way around. “Israel” is the one controlling Palestinian land, not the other way around. “Israel” is building settlements on Palestinian land for Jews only and refusing to treat Palestinians on land that it controls as equal citizens. So, yes this is apartheid. Palestinians are not controlling areas of Jewish inhabitance and refusing to grant them equal citizenship, so to accuse Palestinians of engaging in “apartheid” is utterly ridiculous. And “Israelis” enter Palestinian land all the time; they’re called soldiers and settlers. No one can stop them, because “Israel” exercises military power over the Palestinians.

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March 31st, 2009, 2:35 pm


106. Chris said:


The existence of the settlements ought to be dealt with through a negotiated peace agreement. Not by killing people because they live in the West Bank. If Israeli civilians are subject to murder by Palestinian terrorists because they are living in the West Bank then it would seem logical to me that the Israeli government would protect them by building roads for them. The best way of protecting them would be by keeping non-nationals off the roads.

You referred to “the natives.” It seems appropriate to remind you that these are large population centers. Many of the people living in these communities were born and raised there. They too are native.

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March 31st, 2009, 2:38 pm


107. Akbar Palace said:

Palestinians are not controlling areas of Jewish inhabitance and refusing to grant them equal citizenship…


You must be joking, right? Palestinians, and more specifically, the PA, has NEVER allowed Jews to remain in land under their control, nor have they guaranteed their safety.

This is why ALL JEWS were forced to leave Sinai (at Egypt’s request) and Gaza (the PA’s request). Both these governments “refused to grant [Jews] equal citizenship”.


The existence of the settlements ought to be dealt with through a negotiated peace agreement. Not by killing people because they live in the West Bank.

Exactly. There NO instances (ZERO, NONE, NADA), past and present, showing if Jews do not “occupy” Arab land, they will even be left alone:

– Before 1967, Israel was still at war.
– After Israel left Lebanon, Israel is still at war with Lebanon.
– After Israel left Gaza, Israel is still at war with the defacto government in Gaza, Hamas.

This is one strong reason why the liberal parties faired so poorly in the lastest elections. They’re “out of touch”.

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March 31st, 2009, 4:06 pm


108. Nour said:


You clearly have no regard for Palestinian life or Palestinian rights over their land. “Israel” has no right to control any part of Palestine; it has no right to build settlements there; and it has no right to establish an exclusively Jewish state on Palestinian land. The Palestinians are reacting to “Israeli” oppression. The Palestinians never left their land looking to cause trouble anywhere; they were living on their land and were forced out and turned into refugees on their own land only because the land was desired by Jews.

The Jews living in settlements are NOT natives, in any sense of the meaning. They are foreign elements that came from various different countries around the world and set up camp on land that belongs to others. “Israel” continues to build these settlements and eat up more Palestinian land while forcing Palestinians to live under occupation and humiliation. But you expect Palestinians to just sit and allow “Israel” to continue to take their land until a “final settlement” is reached in “peace negotiations.” This is nonsense; no people in the world would accept to be treated like the Palestinians have been. To be terrorized on a continuous basis by a criminal, racist, terrorist entity is not something anyone is willing to put up with.

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March 31st, 2009, 5:05 pm


109. Nour said:


This is all nonsense. The problems started when a state was created exclusively for a particular group of people that were shipped from all over the world to settle on land inhabited by others. This is the essence of the problem, all the rest is meaningless jargon. The majority of Jews living in Palestine are illegal, illegitimate settlers who were transported, according to an ideological agenda, to a country they never knew or saw in order to establish a racist, exclusive state there that excluded the natives of the land. Everything the Palestinians have done was in reaction to a grave injustice committed against them.

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March 31st, 2009, 5:13 pm


110. Akbar Palace said:


Since you do not accept Israel, what is there is nothing to discuss.

Like I said, “Good luck with that”.

I’ll let BB, Barry, Abbas, and Bashar hash it out. You can play the “spoiler role”.

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March 31st, 2009, 6:02 pm


111. Chris said:


While I don’t have the time to point out the numerous errors of fact in each one of the sentences of your last post, I would like to point out the most glaring problem. The notion that one is reacting to something does not justify their behavior. Simply because the Palestinians are reacting doesn’t justify killing civilians or settlers. This notion that “they started it” really doesn’t get anyone anywhere nor does it justify killing Israeli civilians simply because they live on the wrong side of the Green Line. Oh, wait, you’ve put Israel in quotes. So, it seems that the Green Line is meaningless to you.

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April 1st, 2009, 12:23 am


112. Nour said:


That’s right the “green line” is completely meaningless to me. The very inception of the so-called state of “Israel” was illegal and illegitimate. And your bias and disregard for basic human rights is evident in every word that you spew. You go out of your way to defend “israel” when it is massacring innocent civilians, but you find it objectionable that Palestinians would dare use force against their occupiers. Not once have I seen you condemn settlers for consistently and continuously attacking Palestinians and intimidating them, but your feigned “humanity” comes out when they are at the receiving end of a normal reaction to their criminal behavior.

The settlers are criminals, plain and simple. They are not “innocent civilians.” They didn’t innocently stumble upon land in Palestine and innocently build homes there to lead a normal life. They came as part of an ideological agenda to cleanse this area of its indigenous inhabitants and take their place on the land because they believe that Yahwa promised them this land and commanded them to annihilate the people on it. Their everyday actions and behavior demonstrate exactly how these people think and why they are there. But you don’t mind of course because you don’t care about Palestinian land being taken and Palestinian life being destroyed. Until every inch of Palestinian land is liberated the Palestinians have the right to use every means at their disposal to defend their land and restore their rights. If the settlers don’t like it, they can leave. No one invited them in the first place to take someone else’s land. I can’t take over your house, attempt to throw you out, and then complain if you use violent means to defend your right to your own home.

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April 1st, 2009, 11:04 am


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