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The Palestine Security Exchange (PSE) or Al-Quds index is a vehicle created by the Palestinian people to enable them create and distribute wealth more easily and equitably among the population. The exchange aims to facilitate and maximize the flow of long term investment capital into the Palestinian economy. Just as is the case with other security exchanges world wide, the PSE is has experienced its highs and lows since it was incorporated in 1995. It has on its part achieved considerable success in marshalling investment both for Palestinian companies and the Palestinian economy.
Discussion:
The Palestine Security Exchange has made great effort to promote Palestine as a great opportunity destination for investment. Generally the regulatory and technical environment has been greatly improved making the bourse a viable investment destination in the Middle East. Generally the PSE has worked hard at modernizing private sector companies moving way from family owned structure to limited companies. Over the years it has seen the number of traded securities grow to a high of 40 companies as of May 17th 2010 (Salama, 2010).
Having attained a high of 1314.52 on 4th December 2005, the stock exchange has seen the Al-Quds index fall to operate in the mid to low 500s over the year (Bloomberg, 2010). For the past year the situation in Palestine has been made worse by the continued blockade of the settlement by Israelis and as such the region has experienced an overall negative growth.
(EMERGEINVEST 2010)
Overall, the liquidity position in the PSE has greatly improved in the last decade, with trading volumes rising by 13% in 2008; they fell by 30% in 2009 in line with global trends. The great spike witnessed in 2005 was as a result of stability both political and economic experienced through the territories. Business flourished and in this year 5 companies joined the Palestine Security Market further expanding it.
(The Portland Trust, 2010)
Additionally, the value of shares traded fell b 58% in 2009. This was reversal of the growth experienced in 2008 of 48% but however in line with global trends. Generally after the great high of 2005, the index has generally experienced falling share trades in all by one year (2008). The falling in the value of the shares was expected. The market h ad experienced a dramatic and very sharp rise in the value of securities traded that the market had to go through a correction period. It was also a period of profit taking by the traders. Additionally, in 2005, there was an election and a change of government. This coupled with the rise to the second intafadha, had the combined result of having a negative economic growth.
(The Portland Trust, 2010)
Market capitalization rose consistently from 1997 to 2004 before experiencing the great leap in 2005. After reaching the dizzying heights of $4.5 billion dollars, it gradually fell for the next three years before improving in 2009 despite the global financial crisis. As at the end of 2009, market capitalization was at 2.4 billion US dollars. A very impressive figure for an emerging market operating under very difficulty circumstances. The fall in value of market capitalization was in line with the happenings within the Palestinian territories. This was a manifestation of the share price correction that was happening within the bourse. This was fall in capitalization was sustained thorough he following years as the political situation worsened and the blockade by the Israeli forces took a negative tool on the economy.
(The Portland Trust, 2010)
The future of the PSE looks rosy. There are companies that are lined up for listing and the company that owns the exchange is itself positioned for listing within the year-2010. This will greatly increase liquidity and the number of shares being traded within the bourse. As a result of the wider variety on offer, it should make the bourse rapid growth well grounded on strong fundamentals.
Conclusion:
The Palestinian economy is a very fast growing economy. It is forecast ed by the International Monetary Fund (IMF) that in 2010, the Palestinian Territories will witness economic growth reaching seven per cent with a very high possibility of reaching 10 per cent in the next three years (MENAFN 2010). This for an economy operating in very difficult circumstances is very impressive and encouraging. For an investor looking to invest, though risky, the returns to be gotten from the Palestinian territories are very impressive. The biggest returns are to gotten in the areas of construction both of houses and basic infrastructures. Since the bourse is based in the West Bank cities of Nablus and Ramallah, it has been able to thrive as a result of benefiting from political stability and rapid economic growth in the two cities.
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