Jordan Capital Market Update

Jordan Capital Market Update

Recent developments are indicative of things to come:

The Amman Stock Exchange (ASE) has been showing signs of growth in terms of trading values, market capitalisations, and index movements.

Amendment to Jordan’s Securities Law are soon to pass Parliament. Among other things, the listing of ETFs on the ASE will be allowed. With the Amman Stock Exchange’s ASE 20 Index up, and so far one ETF fund launched (but yet to be listed), expect more investment funds to be created for all sorts of investments in country and outside.

Jordan’s capital market institutions, the Amman Stock Exchange (ASE) and Securities Depository Center (SDC), have joined Abu Dhabi’s Tabadul platform, linking to several capital markets in the region and beyond, and facilitating cross border trading and investing.

The SDC launched direct access to real-time securities ownership data via Jordan’s national Sanad Application. Individuals can securely verify their registered asset holdings instantly. The SDC has also expanded its mobile app features, e-Portfolio, and automated SMS notification platforms, allowing instantaneous tracking of account statement changes. This will increase investor confidence.

The London Stock Exchange made its third visit to the Kingdom in recent years. LSE and ASE are to work on a Jordan Capital Market Day in London later this year.

Jordan’s private sector has been active in issuing sukuk, an instrument that has been mostly used by the Government or Government owned companies. So far, two bank owned Islamic lease and consumer finance companies, Al Kawthar (AJIB) and Bindar (Bank Al Etihad), have issued Mudaraba sukuk with Al Kawthar issuing two tranches of JD 6 million out of its JD 15 million approved program, and Bindar issuing its JD 10 million sukuk. Tenors are for 1 year for both issues, with an expected yield of 6%. A third sukuk issue is on the way by another bank owned Islamic finance company.

The consolidation within the brokerage sector, a long awaited move, continues apace, with UFICO taking the lead and buying/merging with several brokerage firms. Other brokerage firms are expected to follow suit.

On a recent trip to London with a Jordanian client seeking funding for its companies, I was pleased to have a meeting acceptance response rate of 100%. Normally, this rate has been around 50%. From conversations in London with investment banks and other financial and legal service providers, it is apparent that Jordan is increasingly being viewed as one of the “alternatives” to the Strait of Hormuz in terms of transportation routes (highways, pipelines, railroads, airports and airline connections) as well as an alternative source of commodities (e.g. phosphate) and manufactured products and services. Oil and gas in only part of the picture.

The Jordan Securities Commission is working on regulations for the issuance of convertible bonds. This is good news for all capital market stakeholders as it provides an alternative funding tool that is good for the fixed income and equity markets.

Jordanian banks have been active in issuing green and blue bonds. International Financial Institutions such as the IFC and EBRD have been active in supporting these instruments. Will listing these bonds on the London Stock Exchange’s ISM market help raise Jordan’s profile as a viable investment destination and further develop the country’s capital market? Absolutely!

Several Jordanian banks have capitalized reserves, share premiums, or retained earnings to distribute bonus shares. Jordanian banks have utilized this strategy to strengthen their capital adequacy ratios and fund regional expansions.

Jordanian banks are already present in regional markets: Iraq, Syria, Cyprus, Saudi Arabia, and soon Malta. Jordan’s banking sector is becoming Levantine - a region that historically has been under serviced in terms of all sorts of financial products and holds big potential for growth in the near and medium terms.

All the best